ETF Trends
ETF Trends

Grain prices have surged this year, and all indications are that it may not stop anytime soon. It might be time to start thinking about easing your pain at the grocery store with exchange traded funds (ETFs).

The price of all types of grains are expected to rise beyond their two-year highs. In November, they inched further higher: The United Nations’ Food and Agriculture Organization on Wednesday said its Food Price Index rose 3.7%, reports Sameer Mohindru for The Wall Street Journal. [5 Agriculture ETFs Dominating the Markets.]

This is the fifth uptick in a row of the index rising. The case for grains can be made on a few fronts:

  • Inventories are low, drained by a poor crop yield around the world this year. In ordinary times, there’s a stash that can be accessed to make up for shortfalls. The United Nations has forecast that this year may end with a 10% drop in the global wheat stock.
  • Russia is going to sit out the wheat export market until at least July 2011. The country is a major supplier of wheat around the world, so its contribution will be missed.
  • Weather is also an issue. La Nina is ongoing and has contributed to heavy rains in Australia. This has led to crops to be downgraded to “feed grade.” In the United States, dry weather has hurt the planting of winter wheat. Corn stocks here could fall more than 50% this year. [5 ETFs To Hedge Agflation.]

Take your pick on how you want to get exposure to grains. Futures-based ETFs and exchange traded notes (ETNs) – such as iPath DJ-UBS Grains TR Sub-Idx ETN (NYSEArca: JJG) and PowerShares DB Agriculture (NYSEArca: DBA) – will give you exposure that correlates more closely to the price of grains (though not exactly).

Equity ETFs that hold producers, such as Market Vectors Agribusiness (NYSEArca: MOO) and PowerShares Global Agriculture Portfolio (NYSEArca: PAGG), may do well in this environment, since demand for their products is going through the roof.

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.