Agricultural ETFs Pop as 2020 Comes to a Close | ETF Trends

Agricultural ETFs are making solid gains Wednesday, as agricultural futures like wheat and oats are on the run in the final days of 2020.

Oats futures surged Wednesday, up more than 3.17%, targeting their June highs. Wheat futures rallied 3.40%.

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. Last week, 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 Outlook for Agricultural Commodities

Financial institutions like ING predict the commodities markets to continue to climb as further recoveries in economies across the world provide support and further stimulus packages remain a possibility.

The Dutch multinational banking and financial services corporation noted that substantial growth in the money supply could precipitate more funds flowing into the commodities and speculators increasing their long positions, particularly in metals and agricultural commodities.

A weaker dollar could further stimulate the prices of commodities, most of which are traded in the American currency.

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

This is because COVID-19 “is a social crisis which has shifted policies towards accommodating social needs,” he said, explaining that it would result in an increased consumption of commodities.

For investors looking to play agricultural commodities using ETFs, there are several good options. The Invesco DB Agriculture Fund (DBA) invests in a diversified basket of agricultural natural resources, such as wheat, corn, and soybeans, and can be a useful diversifying agent or inflation hedge. The targeted focus of this fund can make it more fitting for investors looking to implement a shorter term strategy.

DBA YTD Performance

The Teucrium Wheat (WEAT) is a solid option for wheat-lovers. Teucrium also has funds that focus on corn and soybeans. Another option to consider is the RICI-Agriculture ETN (RJA), which has more diversified holdings.

All of these funds are gaining ground on Wednesday, as stocks give up some of their earlier gains.

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