Although a slight drop in demand has been seen in the markets for cocoa, the commodity has risen to levels seen not seen in months. Worldwide, production is down, although cocoa is still used frequently. We eat it, drink it and use it as gifts, for comfort and for treats.

Julian Murdoch for Hard Assets Investor reports that cocoa futures have gained 20% since July, and despite some volatility, prices are poised to climb further. The world’s top five cocoa producers are Ivory Coast, Ghana, Indonesia, Nigeria and Cameroon. These five countries are responsible for roughly 70% of global cocoa production each year. Rain and disease, however, could interrupt production.

The Ivory Coast has been riddled with black pod disease that has affected crops, as has too much rain. If this continues, it could support the levels at which prices currently reside.

Meanwhile, sugar has been jarring retailers who want to keep consumers spending. For that reason, some retailers haven’t raised prices and have absorbed the extra cost themselves in order to keep shoppers buying candy and other sugar-heavy products, reports Karen Robinson-Jacobs for The Dallas Morning News.

The average price of a bag of sugar has gone up 9.2% from a year ago, and sugar futures are up 70% since April.

• iPath Dow Jones AIG Cocoa ETN (NYSEArca: NIB): up 12.7% year-to-date

• iPath Dow Jones AIG Sugar ETN (NYSEArca: SGG): up 63.8% year-to-date

For more stories about cocoa, visit our cocoa category.

Mitchell Hartmen for Marketplace reports that a steep drop in energy prices and a drop in demand has edged food prices lower over the course of the recession. But if you’ve gotten comfortable, this trend could end as soon as the economy recovers, according to the U.S. Department of Agriculture.

Farmers will be paying more for fertilizer and fuel and it’s predicted that this increased cost will eventually make it onto shelves, taking food prices up 2%-3%. A few commodities that could be impacted include:

• Soybeans. Tight supply of these beans has the prices of futures edging up already, up 2.2%. Lisa Shumaker for Forbes explains that soybean futures rose 23-3/4 cents to close at $11.14-1/4 a bushel Thursday. The new-crop November contract slipped 1/2 cent to settle at $9.96 a bushel. Strength in the cash market sparked the rally in the nearby soybean contract.

• Corn. Corn is in a mixed situation; the supply is high, which has both the supplier and the buyer in a good position. Rick Plumlee for The Chicago Tribune reports that corn prices for December delivery are trading for less than $3.50 a bushel, much less than one year ago.

• Sugar. Mark J. Perry for Seeking Apha reports that sugar may be a great value for the producers, but the consumers may not like the taste of higher prices. As a result of trade restrictions on imported sugar coming into the United States at the world price, the U.S. sugar beet producers are benefiting. In the United States, buyers pay twice the amount, 26.6 cents for domestic sugar from beets vs. 13.1 cents for sugar from cane.

Just a few of your ETF options when it comes to playing the agriculture sector:

• PowerShares DB Agriculture (DBA): down 1.6% year-to-date; holds sugar, corn, soybean and wheat futures

For more stories about agriculture, visit our agriculture category.

The food plan initiative, part of the Group of 8’s Summit meeting, grew from a $15 billion project over three years to $20 billion. Peter Baker for The New York Times reports that Obama did clarify that whether or not developed nations have an obligation to help Africa, the continent of nations has to build “transparent, efficient institutions.”

Some of the highlights in the G8’s food plan, mentioned by Roger Runningen for The Age:

• A three-year program of up to $20 billion  in agricultural investments to help the world’s poor farmers grow and sell more food
• The initiative would be funded by G8 countries and international organizations, including the World Bank, along with other nations and emerging markets to help support the cause
• A “shift” from food aid, this plan is intended to provide assistance to help the countries themselves  put in place the right policies to be able to produce food by themselves
• Overall hunger reduction and creation of economic growth while sustaining producing natural resource bases

The effort could affect at least three ETFS, and potentially more if it proves to be successful:

• Market Vectors Agribusiness (MOO): up 18.7% year-to-date; the plan could step up demand from producers

• PowerShares DB Agriculture (DBA): down 7.6% year-to-date;  this ETF holds futures for the staples of diets around the world – corn, wheat, sugar and soybeans

• E TRACS  UBS Bloomberg CMCI Food ETN (FUD): up 1.4% year-to-date;  tracks an index of 11 agricultural futures contracts and two livestock futures contracts. (Note that ETNs differ from ETFs).

For more stories about agriculture, visit our agriculture category.

One of the more common misunderstandings of investing in the commodity world is what commodity funds actually hold, explains Gary Gordon of ETF Expert.

While ETFs and ETNs have made the investment process easier, it helps to know exactly what you’re investing in to avoid surprises. It also helps to explore all of your options, as well, because in some cases, a fund that invests in commodity producers may be performing better than the commodity itself.

Take Market Vectors Gold Miners (GDX) as an example. Year-to-date, it’s up 9.8%, while SPDR Gold Shares (GLD) is up 5.9%.

The types of commodity funds available include:

• ETFs that invest in companies. Examples of this are the aforementioned GDX. It also includes Market Vectors Steel (SLX), iShares S&P Global Energy (IXC) and Claymore S&P Global Water (CGW). In these funds, you’re investing in companies that are in some way involved in the production of these commodities, rather than futures or the commodities themselves.
• ETFs that hold futures. These include United States Oil (USO), PowerShares DB Gold (DGL) and iShares S&P GSCI Commodity-Indexed Trust (GSG). An advantage to owning these types of funds is the fact that rolling over futures contracts is handled for you.
• ETFs that hold the physical commodity. This includes iShares Silver Trust (SLV) and iShares COMEX Gold Trust (IAU). These ETFs eliminate the hassle and expense of owning and storing a physical commodity.
• Commodity ETNs. Commodity ETNs are the same as other ETNs in that they’re debt obligations backed by the full faith and credit of the issuer. Types of these include iPath Dow Jones-AIG Commodity Index (DJP) and E-TRACS UBS Boomberg CMCI Food ETN (FUD). Look at the underlying index to see how it’s constructed – for example, FUD’s index is a basket of agriculture and livestock futures.

This is by no means a complete listing of all these types of funds. When you’re looking into commodity ETFs, check to see what it holds so you know what you’re getting, how it stacks up performance-wise against other ETFs targeting the same commodity and follow the trend lines using an entry and exit strategy.

For the rundown on the differences between most of the commodity funds, check out this commodity report we ran last month.

For more stories on commodities, visit out our commodity category.

In twelve months, food costs have risen 117% with products such as basic foods like beans up 45% and pork up 27%, writes Matthew Bretherton for Money. True, inflation has slowed, but that’s primarily on the falling oil and gas prices.

We throw away food in the millions of tons, much of it is still safe to eat, but now we are less apt to throw away comestibles. A greater number of people are starting to take up this trend and we are starting to turn back to the kitchen stoves once more instead of buying ready meals.

“Inferior” food substitutes and comfort foods, such as baked beans or white bread, are on the rise as shoppers try to find the best amount of food for a bargain. Products past “best before” dates are also being bought up at dirt cheap prices at that long forgotten corner of the market. It should be worth remembering that these dates are guidelines only, but common sense should also dictate a shopper’s decision.

By sticking to a less opulent food plan, consumers may save money, cut food waste, and maybe eat healthier.

ETFs that provide investors a window into food prices and agriculture include:

• Market Vectors Agribusiness ETF (MOO): a global agriculture market ETF, down 3.3% year-to-date
• PowerShares DB Agriculture Fund (DBA): a futures contracts-based ETF, down 4.7% year-to-date
• iPath Dow Jones AIG-Agriculture (JJA): down 1.7% year-to-date
• E-TRACS UBS Bloomberg CMCI Agriculture (UAG): down 29.5% since April 1 inception
• ELEMENTS Rogers Intl Commodity Agriculture (RJA): down 2.8% year-to-date
• ELEMENTS-Linked to MLCX Grains Index (GRU): down 40.8% since Feb. 15 inception
• PowerShares Dynamic Food and Beverage (PBJ): down 6.1% year-to-date
• E-TRACS UBS Bloomberg CMCI Food (FUD): down 25.2% since April 4 inception

But what kind of implications is a matter of much debate.

Californians voted yes on the proposition to free around 20 million egg-laying hens from their tiny cages, but the farmers are the ones with their feathers ruffled. For months farmers had contended that the measure would drive up egg prices or even put them out of business because of the high cost of retrofitting their farms with cage-free facilities, report Carla Hall and Jerry Hirsch for The LA Times.

California already imports around one-third of their eggs from farms outside the state, which are not subject to these limitations, so most suspect there will not be any jump in egg prices. The measure does not take effect until 2015, either, so there is plenty of time for farmers to shore up and retrofit their farms. Typically, eggs from cage-free hens cost at least 25% more than conventional aggs.

The measure also bans confining crates and cages for hens, pregnant pigs and veal calves that don’t allow the animals to turn around, lie down and extend their limbs. The largest pork producer here already went crate-free and there are few veal producers in California.

Many of the larger fast food chains, such as Burger King and Denny’s already use cage-free eggs.

• MLCX Livestock ELEMENTS ETN (LSO), down 16.5% since April 15 inception

• E-TRACS UBS Bloomberg Food (FUD), down 25.7% since April 4 inception

The largest gold ETF shot up 11.6% along with prices – the biggest one-day gain ever. Investors are fearing more tightening of the credit markets, and they’re reacting quickly, says Stevenson Jacobs for the Associated Press.

Gold is attractive at times like these, because it’s known for holding its value.

Among other commodities, oil rebounded after several days of losses, while heating oil and gas futures both fell. Among agriculture commodities, most grain prices are trading higher, while soybeans fell slightly.

Affected ETFs include:

• SPDR Gold Shares (GLD), up 3.8% year-to-date
• United States Heating Oil (UHN), up 14.7% since April 10 inception
• United States Gasoline (UGA), down 3.2% since Feb. 28 inception
• PowerShares DB Oil (DBO), up 6.3% year-to-date
• PowerShares DB Agriculture (DBA), down 0.8% year-to-date
• E-TRACS UBS Bloomberg CMCI Food (FUD), down 11.7% since April 4 inception

Meanwhile, while the dollar rose yesterday after the Federal Reserve kept interest rates steady, today it’s fallen back some against both the yen and euro, reports Elaine Fei for Investment Markets. The dollar was also hurt by news about the housing market, which stated that home construction had fallen to its slowest pace in 17 years.

The PowerShares DB U.S. Dollar Index Bullish (UUP) is up 3.1% year-to-date.

For full disclosure, some of Tom Lydon’s clients own shares of UUP.

Lately, have you noticed your grocery bill going way up, even if your cart isn’t way full? In the United States alone, the cost of groceries went up at an annualized rate of 8.4% for July. Even though commodity prices are falling, do not expect the food prices to start lowering, especially because of globalization, there are many more middle class families worldwide to compete with, says Sean Broderick for Money And Markets.

Food is something we will always need, and like energy, we use it up. Here in America, it may feel like we have the security of plentiful, affordable food. But Brodrick points this out: U.S. consumers spend roughly 15% of every dollar on food. In China, 30% of consumer income is spent on food. In India, it’s closer to 35% or even 40%. And these are relatively “rich” countries. When people begin running out of food, where do you think they will travel to?

Surging demand for food is already making waves around the world, and this is a problem that is going to persist and get more intense as time goes on.

Today, the Department of Agriculture cut its forecast for this year’s corn and soybean harvests because of drought. Because corn will be about 12.1 billion bushels (down from the estimated 12.3 billion last month) and soybeans will be at 2.93 billion bushes (down from 2.97 billion last month), the result could be higher commodity prices.

The corn crop will be 8% below last year’s, while the soybean crop would be 13% higher, reports Christopher S. Rugaber for the Associated Press. Even so, this year’s corn crop would be the second largest on record, while the soybean crop would be the fourth largest.

ETFs give two ways for investors to access food prices and the boom in agriculture: by investing in futures, or investing in companies that produce such products.

Among the ETFs available that enable investors to do this include:

• PowerShares DB Agriculture (DBA), down 1.9% year-to-date
• iPath Dow Jones AIG-Agriculture (JJA), down 7.4% year-to-date
• ELEMENTS-Linked to MLCX Grains Index (GRU), down 17.9% since Feb. 15 inception
• Market Vectors Agriculture (MOO), down 26.3% year-to-date
• E-TRACS UBS Bloomberg CMCI Food (FUD), down 6.4% since April 4 inception

They’re down now, but will a reversal in the general markets change that? Stay tuned.

School cafeteria budgets are getting squeezed, and as evidence that no good deed goes unpunished, it’s probably because they’re trying to serve the kids well-balanced, nutritious lunches. Steve Henn for Marketplace reports that putting all those healthy options on one plate is getting pricey.

For example, Arlington, VA, serves 10,000 cartons of milk a day. The cost for one of those 8-oz. cartons rose by 10 cents last year, sending the school district into the red.

Many schools at the very least want their lunch programs to support themselves, or even turn a profit. Some school food service directors are even willing to sell junk food if that’s what it takes to make ends meet. In most states, that’s not illegal even though things like Snickers don’t meet federal dietary guidelines.

Food prices have stepped back from their highs, but their cost continues to put a crimp on many budgets. Affected ETFs:

• iPath DJ AIG Agriculture Total Return Sub-Index (JJA), down 2.4% year-to-date
• E-TRACS UBS Bloomberg CMCI Food (FUD), down 1.6% since April 4 inception
• ELEMENTS MCLX Grains Index (GRU), down 13.4% since Feb. 15 inception
• PowerShares DB Agriculture (DBA), up 2.9% year-to-date

The ETN offers access to exotic markets that are not completely suited to an exchange traded fund (ETF) or mutual fund. For example, the iPath Dow Jones AIG Cocoa Total Return sub-Index (NIB) can give investors access to a rich part of the commodities market.

One of the best benefits of owning an ETN is that they do not generate capital gains distributions and do not require a K-1 tax form. They are treated as prepaid forward contracts for tax purposes, reports David Hoffman for Investment News.

As of right now, the tax treatments for ETNs is being challenged, but many ETN providers are not swayed. They see the popularity of this debt instrument as a wonderful opportunity for everyone involved. As debt, ETNs are backed by the issuer, so you’re taking the risk that they won’t run into financial trouble. It’s an important thing for investors to be aware of in this climate of heavy losses by financial institutions.

ETNs don’t have to disclose their holdings on a daily basis, either.

As of mid-August, there were 92 ETNs on the market, 66 of which launched just this year. Providers say it’s too early to judge how successful they will be based solely on assets; it wasn’t until recently that they reached for a wider audience.

Other exotic ETNs:

• iPath MSCI India Index ETN (INP)
• E-TRACS UBS Bloomberg CMCI Food ETN (FUD)
• E-TRACS UBS Bloomberg Long Platinum ETN (PTM)
• Market Vectors Renminbi/USD ETN (CNY)