ETF Chart of the Day: Down on the Farm

Don’t look now but even though there has been immense global equity weakness in the past twenty four hours, there appears to be a stealth rally occurring in the largest Agricultural Commodity based ETP, DBA (PowerShares Agriculture, Expense Ratio 0.85%).

The fund has seen only modest inflows in the trailing one month period, pulling in about $13 million via creation activity, but the real story is that it is trading at its highest levels currently since March, and trading volume has been building to a bit above average lately.

The fund has approximately$926 million in assets under management, making it almost seven times larger than the second biggest fund in the “Agriculture” segment, which would be RJA (Elements Rogers International Commodity Agriculture ETN, Expense Ratio 0.75%).

DBA unlike RJA is structured as an ETF, yet is still Futures based and according to fund literature is “designed for investors who want a cost-effective and convenient way to invest in commodity futures. The Index is a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities.” When we look at current holdings in DBA we see the largest weightings as follows: Cocoa (14.10%), Soybeans (13.38%), Corn (13.37%), and Live Cattle (13.10%), with lesser weightings across commodities (in order of weightings) including Sugar, Coffee, Wheat, Kansas Wheat, Lean Hogs, Cattle, and Cotton.

Seasonality is of course extremely important when dealing with commodities, as are weather conditions, and making a single bet on any one given agricultural commodity can of course
be a dicey proposition without some foresight into either of the aforementioned items. Thus, a diversified, rules-based basket approach is likely appealing to those retail and institutional investors whom want exposure broadly to the Agricultural space and this likely explains the success DBA has had since its 2007 inception in terms of asset raising.