Can agricultural ETFs continue to soar after a terrific August?
The agricultural commodities market has been an area to watch lately, given concerns over the growing global food crisis and rising prices. Global food prices are rising at the fastest rate ever as war in Ukraine has disrupted crop supplies, piling more inflationary pain on consumers and deepening a global hunger crisis through markets basic cereals and vegetable oils. Invesco DB Agriculture Fund DBA added 4.1% last month (as of September 2, 2022).
The war in Ukraine then caused food prices to rise at their fastest rate ever. Russia and Ukraine are major grain exporters and together account for more than a quarter of the world's wheat trade and a fifth of the maize trade. Ukraine is also the largest exporter of sunflower oil.
Russia and its ally Belarus are also the world's leading fertilizer exporters. In addition to the sanctions, soaring energy prices have increased the costs of producing and transporting fertilizers, raising the possibility of a continued spike in food prices.
Many countries have resorted to food protectionism in the face of growing shortages. Export restrictions make food prices even more expensive. Some specific commodities staged an even higher run. Corn, wheat and coffee are among the few agri-food products that have recently seen a recovery.
Dry weather in Brazil's main producing region has led to higher coffee prices. This adversely affected the development of coffee buds. Drought and poor crop quality have pushed maize prices up. Many private analysts discount yield and total production estimates for corn and soybeans. The USDA's Growing Conditions Report showed corn ratings down 3% to 58% good to excellent, marking a bigger drop than expected, according to agriculture.com.
In a nutshell, the world is struggling to rebuild grain reserves affected by trade disruptions in the Baltic Sea and adverse weather conditions, especially drought, in some of the major regions producers. Drought is reducing crops from America's agricultural belt to China's Yangtze River Basin (per Bloomberg), raising fears of global hunger and weighing on inflation prospects. We also don't expect the rally to lose momentum in September.
Below, we highlight some of August's winning agricultural ETFs. These ETFs could also continue their momentum in September.
Focus on ETFsTeucrium Corn Fund CORN – Up 14.2% last month
iPath Series B Bloomberg Coffee Subindex Total Return ETN JO – Up 11.8%
ICE-related ITEMS BofAML Commodity Index eXtra Grains Total Return GRU - Up 11.4%
iPath Series B Bloomberg Agriculture Subindex Total Return ETN JJA – up 10.3%
iPath Series B Bloomberg Grains Subindex Total Return ETN JJG – Up 9.9%
Teucrium Soybean SOYB Fund – Up 9.1%
Image from Shutterstock
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
The agricultural commodities market has been an area to watch lately, given concerns over the growing global food crisis and rising prices. Global food prices are rising at the fastest rate ever as war in Ukraine has disrupted crop supplies, piling more inflationary pain on consumers and deepening a global hunger crisis through markets basic cereals and vegetable oils. Invesco DB Agriculture Fund DBA added 4.1% last month (as of September 2, 2022).
The war in Ukraine then caused food prices to rise at their fastest rate ever. Russia and Ukraine are major grain exporters and together account for more than a quarter of the world's wheat trade and a fifth of the maize trade. Ukraine is also the largest exporter of sunflower oil.
Russia and its ally Belarus are also the world's leading fertilizer exporters. In addition to the sanctions, soaring energy prices have increased the costs of producing and transporting fertilizers, raising the possibility of a continued spike in food prices.
Many countries have resorted to food protectionism in the face of growing shortages. Export restrictions make food prices even more expensive. Some specific commodities staged an even higher run. Corn, wheat and coffee are among the few agri-food products that have recently seen a recovery.
Dry weather in Brazil's main producing region has led to higher coffee prices. This adversely affected the development of coffee buds. Drought and poor crop quality have pushed maize prices up. Many private analysts discount yield and total production estimates for corn and soybeans. The USDA's Growing Conditions Report showed corn ratings down 3% to 58% good to excellent, marking a bigger drop than expected, according to agriculture.com.
In a nutshell, the world is struggling to rebuild grain reserves affected by trade disruptions in the Baltic Sea and adverse weather conditions, especially drought, in some of the major regions producers. Drought is reducing crops from America's agricultural belt to China's Yangtze River Basin (per Bloomberg), raising fears of global hunger and weighing on inflation prospects. We also don't expect the rally to lose momentum in September.
Below, we highlight some of August's winning agricultural ETFs. These ETFs could also continue their momentum in September.
Focus on ETFsTeucrium Corn Fund CORN – Up 14.2% last month
iPath Series B Bloomberg Coffee Subindex Total Return ETN JO – Up 11.8%
ICE-related ITEMS BofAML Commodity Index eXtra Grains Total Return GRU - Up 11.4%
iPath Series B Bloomberg Agriculture Subindex Total Return ETN JJA – up 10.3%
iPath Series B Bloomberg Grains Subindex Total Return ETN JJG – Up 9.9%
Teucrium Soybean SOYB Fund – Up 9.1%
Image from Shutterstock
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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