ETF Spotlight on PowerShares DB Agriculture Fund (NYSEarca: DBA), part of an ongoing series.
Assets: $3.16 billion
Objective: The PowerShares DB Agriculture Fund tries to reflect the performance of the Diversified Agriculture Index Excess Return, which is comprised of futures contracts on the most liquid and widely tracked agriculture commodities.
Holdings: Cattle 4.68%, Cocoa 11.23%, Coffee 12.40%, Corn 13.67%, Cotton $2 2.85%, Lean Hogs 8.16%, Live Cattle 12.26%, Soybeans 13.06%, Sugar #11 11.60%, Wheat 4.66% and Wheat 5.41%.
What You Should Know
- DBA has an expense ratio of 0.85%.
- Like most commodity ETFs that hold futures contracts, contango is a factor; when the spot price is lower than the futures price, funds can lose money when contracts are rolled forward to the more expensive contract.
- The fund tracks contracts with expiration dates as far out as 13 months that stand to maximize gains or minimize losses posed by the implied roll yield, according to Morningstar analysts.
- One of the most compelling reasons to invest in commodities is to participate in global growth. Developed economies show high demand for a variety of commodities, while newly-minted middle classes in emerging markets are increasing their demand.
- The sub-sector has posted “standout returns, as demand for foodstuffs and biofuel inputs have handily outstripped supply,” the analysts added. “Increasing agricultural commodity prices have driven investor interest in pure-play agricultural commodity products like this fund.”
The Latest News
- Street One Financial recently commented on increased “volatility buying” in agribusiness ETFs as investors are “are positioning for heightened levels of volatility (but uncertain of direction) in the ETF going forward.” [Traders See Volatility in Agribusiness ETF.]
- The long-term fundamentals of agriculture ETFs are based in part on rising food inflation and population growth. Still, prices of major farm commodities should ease from highs seen in the past year as the rally drives higher output, some researchers predict. [Agriculture, Grains ETFs Under Pressure.]
- Wholesale prices of agricultural products are up 9% from one year ago, and the current jump in global food prices has put 4 million more people into poverty.
For past stories in this series, visit our ETF Spotlight category.
PowerShares DB Agriculture Fund
Max Chen 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.