Energy commodities and precious metals garner most of the press within the broader commodities asset class, but investors can find some notable, tactical opportunities with agriculture commodities or “softs.” The PowerShares DB Agriculture Fund (NYSEArca: DBA) offers broad-based exposure to agriculture commodities, including cattle, coffee, corn, soybeans and wheat.
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.
DBA, like other commodities products, is benefiting from the slumping U.S. dollar. However, some believe the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP), which tracks the price movement of the U.S. dollar against a basket of currencies, including the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc, is poised to rebound. That could make commodities ETFs of all varieties vulnerable to some downside.[related_stories]
Investors looking for tactical opportunities with softs can consider exchange traded products such as the iPath Bloomberg Coffee Subindex Total Return ETN (NYSEArca: JO).
Concerns over coffee supplies out of Brazil may have triggered a short-squeeze in the futures market, forcing large bearish traders to close out positions and buy into the rally. Managed money turned net short on coffee after a selldown of net 21,000 lots over two weeks, Agrimoney reported.
JO “reversed its role once the price broke above in early June. Active traders will expect this role reversal to continue and many will likely look to take a position as close to the trendline as possible in an attempt to maximize their risk/reward. Stop-loss orders will likely be placed below either the dotted trendline or the nearby 200-day moving average depending on risk tolerance,” according to Investopedia.
The iPath Bloomberg Sugar Subindex Total Return ETN (NYSEArca: SGG) and the Teucrium Sugar Fund (NYSEArca: CANE) are other tactical, but sometimes volatile offerings in the agriculture commodities space.
SGG’s “recent close near the trendline is creating an extremely lucrative risk-to-reward setup and many will likely use it as a guide for placing their buy and stop-loss orders,” adds Investopedia.
For more news and strategy on the Agriculture market, visit our Agriculture category.
PowerShares DB Agriculture Fund