The production of crops is being affected by a summer that’s been unusually hot. The degree of damage varies between regions, but to some analysts, it remains clear that there will be a shortage of food in the years to come. If such dire predictions ring true, crop based exchange-traded funds (ETFs) are sure to benefit.
According to Jeff Wilson of Bloomberg, corn and soybean futures gained on speculation that the hot Midwest summer this year will not provide enough rainwater for a plentiful harvest. The gain is speculative because the government predicted a record year for crops. [ETFs for the Most Important Meal of the Day.]
T-Storm Weather LLC reported that August has been the second hottest month since 1960 and Commodity Weather Group LLC said, “about 25% of the U.S. soybean-growing area won’t get enough rain for proper plant development over the next two weeks, and that the dryness could harm a third of the Midwest should rain miss sections of Illinois this weekend, as expected.”
Even farmers are preparing for 5% to 10% lower production than what was initially forecast from field samples earlier this year.
On Aug. 12, corn futures for December delivery were up 3% and soybean futures for November delivery were up 1.4%.
According to Business Intelligence Middle East, Jim Rogers is also bullish on the price of commodities within the next decade. “We’re going to have much, much higher prices over the next few years,” said Rogers. [Agriculture ETFs: Withering Crops, Growing Prices.]
Russia, the world’s third-largest grain producer, is expected to produce only 11 million to 19.5 million ton of crop this year, down from 21.4 million last year, because of drought. Ukraine and Kazakhstan have also been hit with drought while Canada has had a low harvest. The effect has been a spike in global wheat prices to two-year highs.
“A catastrophe is looming,” Rogers said, adding “the world is going to have a period when we cannot get food at any price in some parts of the world.”
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According to our ETF Analyzer, there are 64 commodity-focused ETFs, including these:
- PowerShares DB Agriculture (NYSEArca: DBA): Wheat is 12.6%. Corn is 11.8%.
- iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): Agriculture accounts for 16% of the fund.
- PowerShares DB Commodity Index Tracking (NYSEArca: DBC): Wheat is 5.6%. Corn is 5.7%.
- Teucrium Corn Fund (NYSEArca: CORN): Tracks a basket of corn futures.
- PowerShares DB Agriculture Long ETN (NYSEArca: AGF): Tracks an index of corn, wheat, soybean and sugar futures.
- iPath DJ AIG Grains Total Return Sub-Index ETN (NYSEArca: JJG): Tracks a basket of corn, wheat and soybean futures.
- ELEMENTS MLCX Grains Index Total Return ETN (NYSEArca: GRU): Tracks futures contracts on soybeans, soy meal, wheat and corn.
Sumin Kim contributed to this article.