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.
Related: Agriculture ETF Rally Looks to Change Laggard Trend
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.
Related: Agriculture ETFs Could be Ready to Shed Sluggish Ways
The Teucrium Soybean Fund (NYSEArca: SOYB) holds a mix of three different soybean futures contracts, including the second-to-expire contract at 30%, the third-to-expire contract weighted at 30%, and the contract expiring in the March following the expiration month of the third-to-expire contract at 35%.
Regarding DBA, “alternative argument is that $19.55 is the lowest level the ETF has traded at since 2007, and the price could be forming a bottom. With the price bouncing aggressively off the $19.55 low earlier this year, this is potentially shaping up like the late 2008 to mid-2010 bottom,” adds Investopedia.
For more news and strategy on the Agriculture market, visit our Agriculture category.
PowerShares DB Agriculture Fund
