Drought in India Could Push These Commodities ETFs Higher

Drought has been plaguing the country of India this year, putting upward price pressure on agricultural commodities like sugar, corn, and soybeans.

It’s not just a lack of rain that’s been an issue. On the other end of the spectrum, India has also been seeing heavy rainfall that’s causing flood conditions.

“The monsoon has become more erratic and unpredictable, bringing extreme rainfall on the one hand and sudden drought on the other,” the World Bank said.

In the current climate, it’s been a lack of rainfall that’s hurt the country’s ability to produce sugar. India is the second largest country in terms of sugar exports. This year, the country exported 6.1 billion tons of sugar versus the 11.1 billion exported in the 2021-2022 season.

“India is set to ban exports of sugar for the first time in seven years following a low-yield cane crop hurt by a lack of rain, Reuters reported Wednesday (August 23), adding to a list of crops that includes corn, sorghum and soybeans suffering amid the Earth’s hottest summer on record,” Forbes reported.

Consumers have already been feeling the effects of high sugar prices this year. India’s decreased supply will certainly have a global effect on sugar prices, which have risen over 25% year-to-date.

“India’s absence from the world market would be likely to increase benchmark prices in New York and London that are already trading around multi-year highs, triggering fears of further inflation on global food markets,” Reuters reported.

Reuters Graphics
Reuters Graphics

3 ETFs to Consider

If India’s drought can provide a catalyst for prices to rice in sugar, corn, and soybean, Teucrim has three funds worth noting. They can be used for portfolio diversification in the long-term for investors or for traders, taking advantage of short-term price increases.

For sugar exposure, consider the Teucrium Sugar ETF (CANE) — the only sugar ETF on the market. The fund essentially provides investors an easy way to gain exposure to the price of sugar futures.

For corn prices exposure, consider the Teucrium Corn Fund (CORN). The fund tracks three futures contracts for corn traded on the Chicago Board of Trade.

It includes 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.

For traders looking for opportunities in soybeans, consider the Teucrium Soybean Fund (SOYB). SOYB can essentially provide similar exposure to what investors could obtain by trading in soybean futures contracts themselves.

For more news, information, and analysis, visit the Commodities Channel.