Agriculture ETFs Go Soft as Other Commodities Funds Climb

  • Agriculture ETFs are proving to be laggards behind precious metals and oil funds
  • Abundant crops and tepid demand are plaguing ETFs such as DBA
  • DBA currently features exposure to eights commodities, including cattle, coffee, corn, soybeans and wheat

It has been a banner year for precious metals exchange traded funds and, in recent weeks, oil funds have joined the commodities rally. However, agriculture exchange traded funds are proving to be laggards. For example, the PowerShares DB Agriculture Fund (NYSEarca: DBA) has traded modestly lower this year.

The PowerShares DB Agriculture Fund tries to reflect the performance of the Diversified Agriculture Index Excess Return, which is comprised of futures contracts on the most liquid and widely tracked agriculture commodities.

The PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC), which holds a basket of various commodities, is also in the red, but that fund has heavy energy exposure, levering it to oil prices. DBA lacks that catalyst and is dependent on positive price action in ags and softs, areas of the commodities complex that have languished this year.

“The risk is that weak global trade actually drags down the U.S. economy, depriving the world of one of its only engines of growth. According to IHS Global Insight, models used by the Federal Reserve show that the 19% rise in the dollar since July 2014 could cut nearly 3% off real U.S. gross domestic product from 2015-2017,” reports Ken Brown for the Wall Street Journal.

Just oil prices were previously dragged lower by excess supply, abundant crops and tepid demand are plaguing ETFs such as DBA.