An early bounce in agriculture exchange traded funds faded on Monday with the sector ETFs in a holding pattern after a brutal September sell-off.
Weakness in the dollar over the past week has helped stabilize agriculture ETFs, which can be used to diversify a portfolio and hedge against rising inflation. However, the sector is vulnerable to a global economic slowdown. [ETF Chart of the Day: Agriculture]
The agriculture subsector is sensitive to economic fundamentals such as supply and demand because the fast-growing middle class in emerging markets affects the overall demand for food supply. The simple concept of populations growing as time moves on supports the growth in agriculture investments on a global level. [Agriculture ETFs Struggle to Stay in the Green]
“Getting better seeds, fertilizers, water pumps and farming equipment to where it’s needed is what the private sector is well suited to accomplish,” Roy Steiner, deputy director of agricultural development at the Bill and Melinda Gates Foundation, said in a Barron’s report. “Smart companies can make a difference, and make a profit.”