Food Prices May Fall, But Demand Could Continue Feeding ETFs | ETF Trends

It’s good news for your disposable income, but if it’s so good for agriculture exchange traded funds (ETFs) is a question mark: a report released today says food prices are going to come down.

However, prices are still going to remain "substantially above" average levels, reports Emma Vandore for the Associated Press. The poorest countries will be affected the most, which will require stepped-up humanitarian aid. The report was a joint effort by the Organization for Economic Cooperation and Development and the U.N. Food and Agriculture Organization.

Many factors are converging that continue to stir the pot that is the international food crisis: high oil prices, shifting diets, urbanization in emerging markets, growing populations, flawed trade policies, extreme weather, increased biofuel production and speculation.

Among the other fascinating findings in the report:

  • Depending on the commodity, the report says, prices will be anywhere from 10% to 50% above average: beef and pork will rise 20%; sugar, 30%; vegetable oils, more than 80%.
  • Developing countries such as India and China will dominate the production and consumption of most commodities by 2017.
  • Internationally, overall food prices have gone up 83% in three years, according to the World Bank.

There are a growing number of ETFs and exchange traded notes (ETNs) that have been launched that give investors both broad and focused exposure to agriculture, including:

  • PowerShares DB Agriculture (DBA), up 8.8% year-to-date
  • UBS E-TRACS CMCI Agriculture ETN (UAG), down 1.2% since April 4 inception
  • Elements/Rogers International Commodity Index ETN (RJA), up 0.4% year-to-date
  • Opta Lehman Brothers Commodity Agriculture (EOH), down 4% since Feb. 21 inception

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.