Agricultural ETFs Continue To Gain As Crop Supply Is Limited

Agriculture-related ETFs have been seeing significant movement lately, as crops are on a tear due to a global, coronavirus-induced supply shortage.

With the coronavirus continuing to ravage the globe, issues in the supply chain, especially due to transportation issues, have driven commodity prices higher due to fresh demand, experts said. Recently, rice reached a nine-year high of $500 a tonne in Vietnam and Thailand thanks to a deficit of containers.

In recent years, commodity producers and futures traders realized that investors and traders must monitor diseases that infect not only human populations, but birds, bats, cattle, hogs, and many types of plants including other major crops.

The trend has resulted in gains across the board in agricultural commodities recently, with corn futures up 1.91% Tuesday, wheat futures gaining 1.75%, oats futures adding 2.18%, and soybeans gaining 2.86%.

Among the best performing agricultural ETFs of Tuesday, the Teucrium Corn Fund (CORN) gained 1.54%, while the Teucrium Wheat Fund (NYSEArca: WEAT) added 1.62%, while the Teucrium Soybean Fund (NYSEArca: SOYB) advanced 2.55%.

Investors seeking momentum could especially keep an eye on WEAT. The fund recently hit a new 52-week high. Shares of WEAT rallied approximately 27.2% from their 52-week low of $4.85/share.

Watch The Wheat

The underlying WHEAT FUTURES looks to reflect the daily changes of a weighted average of the closing prices for 3 futures contracts for wheat that are traded on the CBOT: the second-to-expire contract, the third-to-expire contract, and the contract expiring in December. following the expiration month of the third-to-expire contract. The expense ratio is 3.14%.

Although all ages are experiencing price increases, the likely dearth in the exportable supplies in 2021 is driving the wheat prices. The Black Sea wheat market is commencing 2021 at a six-year high and is also on an upward path.

WEAT has a positive weighted alpha of 11.00, suggesting that there is a decent outlook ahead for investors interested in allocating a portion of their portfolio to the agricultural ETF.

Jeff Currie, head of Commodities Research for Goldman Sachs Research, said in a talk on the commodities market that his team was favoring more upside in 2021 as the stimulus packages would be geared toward lower-income groups.

It should be noted, however, that futures are volatile, and thus agricultural ETFs may offer short-term plays for savvy investors with the proper risk profile.

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