Agriculture exchange traded funds can provide a convenient way for investors to play food shortages and higher commodity prices for staples such as wheat, corn, soybeans and sugar. The agriculture subsector is also a nice compliment to any commodity play within a portfolio.
Exchange traded funds and notes tracking the sector include PowerShares DB Agriculture ETF (NYSEArca: DBA), iPath Dow Jones-UBS Agriculture ETN (NYSEArca: JJA) and ELEMENTS Rogers International Commodity Agriculture ETN (NYSEArca: RJA).
“Agricultural commodities have gained momentum recently for a few reasons. First, the subsector has posted standout returns, as demand for foodstuffs and biofuels have handily outstripped supply. Second, increasing agricultural commodity prices have driven investors interest in pure-play agricultural commodity products,” Morningstar analyst Abraham Ballin writes in a profile of the iPath ETN.
An agricultural commodity investment can also help diversify a portfolio due to the lower correlation to equities. Furthermore, an agricultural investment can enhance other commodity investments because the subsectors are not closely correlated to one another. [Agriculture ETFs Level Off After Steep Drop]
DBA is one of the most widely traded agriculture ETFs. The fund has about $2.3 billion in assets. [Agribusiness ETF Jumps 25% Fro October Low]
Food inflation has caused some of the swelling in this subsector, as corn and soybean prices had hit 30-month highs earlier in the year. Meanwhile, The United Nations Food and Agriculture Organization recently suggested another food crisis could materialize as grain prices are on the rise. [Investors Shovel Cash Into Agribusiness ETF]