Agricultural-related exchange traded funds have been gaining momentum as favorable fundamentals from both the supply and demand outlook help lift commodity prices.
Falling inventory levels of U.S. grains have helped lift prices on corn, soybeans, and wheat, the Wall Street Journal reports.
Corn futures have surged after the U.S. Department of Agriculture’s monthly supply and demand report revealed corn production falling short of projections. This week’s rally brought corn prices to their highest close since July 2013.
Meanwhile, soybeans and wheat futures are also trading at their highest levels since 2014.
“It’s an off-to-the-races kind of thing,” Jason Britt, head of Central States Commodities, told the WSJ.
Supply Falls, But Demand Increases
Decimating the supply outlook, dry weather across key growing regions of the U.S. and South America has cut down domestic corn production, which is expected to total 14.2 billion bushels for the current marketing year or 325 million bushels less than projected last month, and 1.1 billion bushels below initial estimates for the 2020 crop last summer, according to the USDA.
Stockpiles of corn are anticipated to be short by approximately 150 million bushels to 1.55 billion bushels. The USDA also reduced its soybean inventory forecast, and wheat stockpiles were downwardly adjusted.
Despite the ongoing coronavirus pandemic that caused many to anticipate lower grain consumption, demand is picking up. For instance, China is experiencing a surge in demand for grains to rebuild its hog herds after culling millions infected by African swine flu.
Furthermore, some market watchers are optimistic that relations will warm between the incoming Biden administration and China, which could help foster more trade.
“There’s a general perception that a Biden administration will be friendlier than a Trump administration,” Sal Gilbertie, president of Teucrium Trading, told the WSJ.
Investors can track the agricultural markets through a variety of ETF strategies. For example, the Invesco DB Agriculture ETF (DBA) is the top fund in the agriculture industry category by assets and provides exposure to a diversified portfolio of various agriculture futures contracts.
Teucrium also offers a suite of agricultural ETFs, including the Teucrium Corn Fund (CORN), Teucrium Wheat Fund (NYSEArca: WEAT), Teucrium Soybean Fund (NYSEArca: SOYB), Teucrium Sugar Fund (NYSEArca: CANE), and Teucrium Agricultural Fund (NYSEArca: TAGS).
For more news, information, and strategy, visit the Alternatives Channel.