ETF Trends
ETF Trends

 

Have you ever wondered what the drought in Australia has to do with your dinner table and your exchange traded funds (ETFs)?

In every aisle, prices at the grocery store are higher. From chicken (up 10% retail) and milk (up 20%) to eggs (up 30%) and tomatoes (up 25%), according to the Bureau of Labor statistics.

The unfortunate drought in Australia has increased demand and pressure for U.S. farmers, while demand for ethanol has taken over most crop land that was used for soybeans.

Higher fuel prices are making it expensive to grow crops and get them to retail markets. Corn inflation has turned meat prices higher and bread (grain) is experiencing rising costs as well.

According to Karen Robinson Jacobs for the Dallas Morning News, many analysts are expecting consumers to keep paying higher prices for food, which accounts for 13% of household spending. After all, people gotta eat. The Department of Agriculture forecasts food prices will rise 4% this year alone.

But that means that while consumers spend more on food, they’ll have less disposable income. Consumer spending is what drives the economy. Without that, it’s just wheel-spinning.

The growing middle class in China and India means more people will be eating meat while the Australian drought has narrowed grain and dairy exports to Europe and Asia, cutting the global supply and causing more countries to turn to the United States for food.
 
To access the rising cost of a trip to the grocery store, look at these funds:

  • Market Vectors Agribusiness ETF (MOO)
  • PowerShares DB Agriculture (DBA)
  • PowerShares Dynamic Food & Beverage (PBJ)
  • PowerShares DB Commodity Index Fund (DBC)

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.