United States Commodity Funds, a provider of various futures-based commodity exchange traded funds, recently launched a broad agricultural commodities fund.
U.S.Agriculture Index Fund (NYSEArca: USAG) began trading on March 14, according to a press release. The ETF has a 0.95% expense ratio.
USAG tries to reflect the performance of the Agriculture Index, which is comprised of 14 “Eligible Agriculture Futures Contracts” that are selected on a monthly basis based on SummerHaven Indexing analysis and requirements. Accordingly, the component weightings may be changed on a monthly basis.
The fourteen agricultural commodities include: soybeans, corn, soft red winter wheat, hard red winter wheat, soybean oil, soybean meal, canola, sugar, cocoa, coffee, cotton, live cattle, feeder cattle and lean hogs.
Weightings are determined by their market market liquidity and the commodities’ overall economic importance. USAG would overweight components with a low inventory and underweight commodities with high inventories in an attempt to reduce the impact of contango – later-dated futures contracts are more expensive than near-term contracts, which causes a fund to lose money when rolling futures contracts that are about to mature. [Five Things to Know About Commodity ETFs]