Agriculture exchange traded funds (ETFs) already have been doing well this year because bad weather has caused supply shortages. However, there’s a new twist as to what’s lowering supplies: an increase in demand from China. China is the world’s largest pork-consuming country, and what do pigs eat? Grains, especially corn, from the U.S. China also has high demand for more pigs because of the upcoming 2008 Olympics that will be held in Beijing. The Olympics will bring a lot of extra people to China that need to eat, so China has been throwing more money at its farmers to produce more meat for consumption. The farmers said they feed the pigs 100% organic pork formula, and sometimes add Chinese medicines to make the pigs healthier. In addition, the pigs are forced to do at least two hours of outdoor exercise each day. This special treatment causes the Olympic pigs to grow two to three months slower than average pigs, and makes them far more expensive, reports the Ming Pao Daily.

In addition, China imports nearly 13% of all soybeans grown in the U.S. to feed its livestock, reports Jeffrey Saut for Raymond James. The extra money that the Chinese government has given to its farmers has caused the U.S. Agriculture Department to estimate that net farm incomes here in the U.S. will increase up to 50% to meet Chinese demand. That increase will likely impact the agriculture ETFs PowerShares DB Agriculture (DBA) and Market Vectors Agribusiness (MOO). Currently, DBA is up 9.0% for the last three months, having launched in January. MOO is up 9.2%, having launched in August.

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.