Drought Has Cut Iran's Wheat Production, Growing Our ETFs | ETF Trends

Agriculture and grains-focused exchange traded funds (ETFs) could get a lift from a new customer buying wheat from the United States: Iran.

After a 27-year break, the country has started buying our wheat again. It’s a sign of the limited options for importers who want high-quality grain, say Tom Polansek and Louise Radnofsky for the Wall Street Journal. Their timing is good, too: wheat production is expected to be slightly higher after good weather followed up damaging flooding in the Midwest.

Since June 1, Iran has purchased more than one million tons of hard red winter wheat, and it’s described as a “very large amount.” The size of the purchases mean the 3% to 4% of U.S. wheat exports are going to a country we haven’t done business with in more than a quarter-century.

Iran has been hit hard by drought, slashing their own production by one-third this year. The fact that they came to the United States to buy their wheat shows how dire the situation is, since the two countries are locked in a battle over their nuclear program.

Iran had been a major wheat importer as recently as 2001-02. The last time it come from us was in 1981-82.

The United States is the largest exporter of wheat for the market years 2008-09. Canada, the European Union, Australia and Russia round out the top five.

  • iPath DJ AIG Agriculture Total Return Sub-Index (JJA), up 6.6% year-to-date
  • DB Agriculture Double Long (DAG), down 12.1% since April 15 launch
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  • E-TRACS UBS Bloomberg CMCI Food (FUD), up 7.3% since April 4 launch
  • ELEMENTS MCLX Grains Index (GRU), down 2.3% since Feb. 15 launch

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.