Agriculture ETFs: Farmland Prices Spike
October 26th, 2012 at 9:59am by Tom Lydon
Farmland is beginning to look like prime real estate as land prices rise along with agricultural commodities. For the average retail investor, agriculture related exchange traded funds can provide exposure to the boom.
Despite the worst drought in half a century that decimated what should have been a bumper crop year, farmland prices are rising as farmers invest in land and take advantage of low interest rates, the New York Times reports. [Corn ETF is Standout Performer in Third Quarter]
The Federal Reserve Bank of Chicago stated in August that farmland prices rose 15% year-over-year across Iowa, Illinois, Indiana, Wisconsin and Michigan, The Federal Reserve Bank of Kansas City also announced that land in the Great Plains region jumped 26 year-over-year.
However, the Fed surveys and sales data are fueling concerns of a potential farmland bubble.
“Any time you have an asset that doubles in value over a decade, there is cause for concern about how sustainable that growth is,” Richard A. Brown, chief economist at the Federal Deposit Insurance Corporation, said in the article.
Nevertheless, the Agriculture Department estimates that net farm income to rise $122 billion this year, compared to $117 billion in 2011, or a 4% increase, the highest income level since 1973.
For the average investor, single or broad agriculture ETFs, such as Teucrium Corn Fund (NYSEArca: CORN), PowerShares DB Agriculture Fund (NYSEArca: DBA) and iPath Grains Total Return Sub-Index ETN (NYSEArca: JJG), can provide exposure to price movements in the commodities market. [ETF Investors Still Hungry for Corn, Soybeans]
Additionally, investors can look at the agriculture sector through ETFs like the Market Vectors Agribusiness ETF (NYSEArca: MOO) to track farm equipment and fertilizer providers.
For more information on the agriculture, visit our agriculture category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.