For investors looking for broad-based, diversified exposure to agriculture and soft commodities, the the PowerShares DB Agriculture Fund (NYSEArca: DBA) is a solid choice. 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.
Supporting the commodities outlook, the China, the world’s top consumer of metals, grains and energy, is seeing its economy stabilize. Moreover, the depreciating U.S. dollar has helped support demand for commodities as an alternative hard asset or a better store of wealth. However, bearish views on agriculture commodities linger.
Commodities have outperformed bonds, currencies and equities this year on speculation over supply disruptions and production cuts that slowly diminished multi-year surpluses, which contributed to the largest price collapse in a generation. Meanwhile, we are also seeing demand improving.
On a technical basis, bull and bear arguments can be made regarding DBA.
DBA “rallied at the start of the year but has given back nearly all those gains. The ETF rallied off a low of $19.55 in February, to $23.01 in June. It closed at $19.94 on Oct. 12. The sharp movement back to the downside means the long-term and short-term trend are both down. That favors a further a drop below $19.55,” according to Investopedia.
Other agriculture ETFs include the Teucrium Corn Fund (NYSEArca: CORN), which “provides investors unleveraged direct exposure to corn without the need for a futures account. The Teucrium Corn Fund was also designed to reduce the effects of backwardation and contango,” according to Teucrium.