It’s not over yet. Food prices are expected to spike in 2011, and investors that are in the know are already whetting their appetites with agriculture exchange traded funds (ETFs).
The scuttlebutt is that food prices aren’t even close to finished rising, and ETFs covering everything from sugar to wheat to soybeans are attracting investor interest.
- The ETF Professor on Benzinga reports that farmers need to plant more crops to meet demand and that’s good news for fertilizer companies, so ETFs across the agriculture board are in a good position. [Growth in the Forecast For Agriculture ETFs.]
- Marie Maitre for Reuters reports that grain prices have grown to two-year highs, and prices are not expected to come down until 2012.
- The United Nations’ Food and Agriculture Organization said last week it expected global supplies to remain tight this and next crop season even though production will be ample. [Commodity ETFs: Are They Too Popular?]
This year, grain and food prices are up 26%, so the coming year is going to be interesting. How much higher can prices go? You can’t forget that there’s an economic recovery, and rising prices could have the negative effect of curtailing consumer spending and hitting the poor where it hurts, explains John Foley for The New York Times.
You’ve got two ways to play rising agriculture prices – equities or futures. Two such funds are:
- PowerShares DB Agriculture (NYSEArca: DBA): Owns futures on coffee, sugar, cocoa, cattle and more. DBA offers exposure to those and other commodities via rolling futures contracts.
- Market Vectors Agribusiness (NYSEArca: MOO): An “all things farm” play, this ETF is the largest of all companies farm related across the spectrum.
For full disclosure, Tom Lydon’s clients own shares of MOO.
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.