Soft commodities have surged on the worst drought in half a century, and now it is time for farmers and agribusiness exchange traded funds to capitalize on the higher prices.
“Corn farmers are actually set to benefit from a 50% increase in the price of their crop,” Nikoleta Panteva writes in an IBISWorld study. “Corn farmers experience strong and inelastic downstream demand from wide range of food industries, so a jump in prices will not sever ties with buyers.”
The Teucrium Corn Fund (NYSEArca: CORN) rose 29.6% over the past three months. [Higher Food Prices Feed Commodity ETF Strength]
The USDA estimates that output will dip 15% from 2011, which will not help offset growth from price gains. [Will Corn ETF Break Out Again?]
Additionally, soybean farmers will also benefit off the drought as soybeans and corn are interchangeable as livestock feed – higher corn prices will force a switch to soybean as a less expensive alternative.
The Teucrium Soybean Fund (NYSEArca: SOYB) gained 16.8% over the last three months.