Investors in the ETF should be prepared for a bumpy ride at times due to the volatility of the sector.
“The index is composed primarily of grain-related agribusiness firms, counting the farmer as a chief customer. Farmer behavior is largely determined by notoriously volatile grain prices, so the fortunes of these companies can swing wildly,” Morningstar notes in a profile of the ETF.
“On the upside, volatility has abated relative to the 2008 turmoil and the commodity space has drawn increasing investor interest,” the investment researcher added. “While a sustained drop in grain prices could certainly drive fertilizer prices lower over the coming years, projections of sharp global population increases, the proliferation of biofuels, production concentration in a small number of nations, and a finite allotment of arable land should create upward pressure on those prices in the long run.”
Market Vectors Agribusiness ETF
