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.
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.