A Brookings Institution report delved deep into the global food shortage spurred by Russia’s invasion of Ukraine. This, of course, is helping to propel food prices into the atmosphere as the economic forces of supply and demand continue to weigh in on prices.
“Global stocks are shrinking,” the report said. “Global wheat stocks of about 300 million tons are sufficient to cover about four months of annual global consumption. Of these stocks, about 50 percent (about 150 million tons) are held in China.”
“We know from the past that prices go up if stocks reach a certain critical low level,” the report added. “In this situation, crisis-induced trade disruptions accelerate market developments and may even lead to government interventions limiting exports to protect national interests. If many countries do this, it has disastrous effects on world markets.”
From an investing standpoint, this provides an ideal opportunity to get commodities exposure as a hedge against inflation. Against a backdrop of inflationary pressures, the U.S. Federal Reserve already hiked interest rates by 75 basis points, and more hikes are expected through the rest of the year.
2 ETFs to Get Broad Commodities Exposure
While there are various options for investors to get corn, soybean, wheat, or other commodity exposure, there are also broad-based options to essentially have it all. One such exchange traded fund (ETF) is the Teucrium Agricultural Fund (TAGS), which combines exposure to corn, what, soybean, and sugar through other Teucrium ETFs that focus on these commodities.
For investors who want tax reporting flexibility while getting commodities exposure, one ETF to look at is the Teucrium Agricultural Strategy No K-1 ETF (TILL), which provides investors long-only futures price exposure to corn, wheat, soybeans, and sugar. Additionally, TILL does not issue a K-1 tax form, and investors will instead receive a 1099 form at tax time.
TILL is an actively managed fund and will hold one futures contract in corn, wheat, soybean, and sugar. TILL will also hold one futures contract in each of the aforementioned commodities, excluding the front-month (aka spot) contract.
For more news, information, and strategy, visit the Commodities Channel.