Agriculture-related ETFs such as funds for corn and soybeans remain elevated after the worst drought in over 50 years decimated crops over the summer.
Agriculture prices have appreciated about 270% since the year 1999. The demand for ethanol in the U.S. has pushed corn prices higher and the growing population has helped secure the long term outlook for these commodity prices. Exchange traded funds that track agricultural commodities have given investors access to this area of the market.
“Reflecting increasing demand and higher prices, global production of corn has increased rapidly since the end of 1999, but annual US production in 2012 is expected to decline over 13% due to a particularly severe drought in the Midwest ‘corn belt’. This has lifted prices over the past couple of quarters. But aside from ethanol production and current weather-related disruptions, there are other major drivers of grain prices,” Simon Smith wrote for ETF Strategy. [High Corn Prices Fuel Agribusiness ETFs]
Corn and soybean harvests have maintained record pace as dry weather conditions plagued farmers in the mid-west this year. Analysts have called the soybean harvest 38% complete and corn harvest 55% complete, reports Reuters on Investor’s Business Daily. However, prices for these commodities have fallen as profit taking and larger-than-anticipated yields have materialized. Wheat has fallen 3% and soybeans are down 2% early this week.
“Any time you have yields rising and you’re in the middle of a harvest and you’ve got the funds relatively long, it’s very difficult to sustain a market. You have to fed a bull market everyday and there’s nothing to feed it right now,” Jim Gerlach of A/C Trading said. [Corn ETF is Stand Out Performer in 3Q]