5 ETFs to Hedge 'Agflation' | ETF Trends

Inflation might not be a near-term prospect right now, but agflation certainly might be. Here’s how to position yourself with exchange traded funds (ETFs).

If you believe the forecasts, food is about to get more expensive:

  • The rising middle class around the globe is creating rising demand for agriculture products and taking commodities to new highs. Often with an improved income comes greater demand for a protein-rich diet, which requires more corn that’s used to feed livestock.
  • On top of that, clean energy laws and interest has led to an increased use of biofuels such as ethanol as a source of energy.
  • According to NewsMax on The Daily Crux, the demand for non-staple foods such as dairy and meat are also inflating the international food bill. [Getting Agriculture Exposure With ETFs.]
  • According to MoneyNews, the outlook for the global food-import bill this year was raised from $921 billion in June. The “sharp” rise in grain, sugar and oilseed prices in recent months is a cause of concern for prices next year, as one study by the United Nations’ Food and Agricultural Organization. [5 Ag ETFs Dominating the Markets.]

While you might feel pain in your pocketbook as prices rise, you can turn lemons into lemonade and benefit from rising prices by using ETFs, too. The more effective hedges may be ETFs that hold futures contracts, since they more closely reflect current prices. However, if you’re looking to dodge issues of contango and tax considerations that come with futures ETFs, consider an equity ETF that gives exposure to commodity producers.

  • Teucrium Corn (NYSEArca: CORN): Holds corn futures
  • iPath DJ-UBS Grains TR Sub-Idx ETN (NYSEArca: JJG): Tracks grain futures
  • PowerShares DB Agriculture (NYSEArca: DBA): Holds a broad basket of futures that can include sugar, wheat, soybeans, cocoa and more
  • Market Vectors Agribusiness (NYSEArca: MOO): Tracks a basket of agriculture producers
  • PowerShares Global Agriculture Portfolio (NYSEArca: PAGG): Tracks a basket of agriculture producers

Tisha Guerrero contributed to this article.

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.