A USDA report revealed lower-than-expected crop yields as the worst U.S. drought in half a century withered corn crops, pushing prices to record highs. Investors seeking to capitalize on the rising food prices may take a look at opportunities in agriculture exchange traded funds.
Early Friday, the United States Department of Agriculture announced that the country’s corn production dropped 17% year-over-year, which is worse than the previous estimates of 15%, reports Paul Vigna for The Wall Street Journal. [ETF Chart of the Day: Agriculture]
The USDA calculates that the average corn yield in the U.S. is just 123.4 bushels per acre, the lowest level in 17 years, compared to the 146 bushels per acre projected last month. [How High Can Corn ETF Rally on Drought?]
Meanwhile, poor weather conditions around the globe have hit regional crops, notably a scorcher in Russia and a deluge in Brazil, pushing up world prices. The United Nations Food and Agriculture Organization calculates that global food prices increased 6% in July.
“I think there should be more inflows if we’re going to track the persistent rise in agricultural prices,” Matthew Lemieux, a research analyst for Lipper, said in a Reuters report. “The consensus is that we’ll see flows rise until we see some change at least in the U.S. drought and other conditions that are pushing prices up globally.”
Corn futures hit a record high $8.49 per bushel Friday. The government report estimates that corn could go as high as $8.90 per bushel, compared to the $6.40 per bushel calculated in July and $4.80 per bushel projected in April, according to USA Today.
“Largely what traders expected for corn and the price was built in,” Sal Gilbertie, Chief Investment Officer and co-founder of Teucrium, said in an interview. “Those who need corn still haven’t bought, thinking the price was going to go down, but any decline would bring on more buying from demand.”