Agriculture ETFs Love the Weatherman

Nearly 160 exchange traded products are up at least 10% this year, according to a Finviz screen. That works out to almost 10% of the entire U.S. ETP universe and nearly 16% of those ETFs have something in common: Exposure to agriculture, livestock or soft commodities.

A drought in Brazil and a harsh winter in parts of the U.S., among other catalysts, have lifted agriculture and soft commodities ranging from coffee to sugar to wheat and livestock. Investors and professional speculators are taking notice.

As global food costs jumped to a 10-month high at the end of March, “hedge funds have increased their bullish bets by fivefold on agricultural futures,” Bloomberg reported. Some ETFs have benefited in a big way.

Once downtrodden and glossed over by investors, “exchange-traded products tracking farm commodities grew by $542.7 million since the end of last year to $2.5 billion as of May 2,” according to Bloomberg.

The iPath Dow Jones-UBS Coffee Total Return Sub-Index (NYSEArca: JO) is this year’s top-performing non-leveraged ETF with a gain of 84.3%, although investors have actually pulled cash from JO even as coffee futures and the ETN have been surging. [Commodities ETFs Cruise Higher]

JO and the iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ), which is up 78.3%, have soared due to drought conditions in Brazil, the world’s largest coffee producer, and slowed production in Vietnam, the world’s largest producer of robusta, a lower grade of coffee than Brazil’s Arabica.

“Flows into agriculture funds as of May 2 reached $107.17 million in 2014, headed for the first yearly inflows since 2010,” according to Bloomberg.

The PowerShares DB Agriculture Fund (NYSEArca: DBA) has pulled in $132 million of its $1.58 billion in assets this year. DBA is the sixth-best PowerShares ETF in terms of 2014 inflows, according to issuer data.