High food prices aren’t relenting and harsh weather conditions should continue to keep them elevated. This could spell opportunities in agricultural commodities.
Needless to say, it’s been a warmer-than-expected summer that’s causing food prices to rise along with global temperatures. In particular, droughts in certain parts of the globe are affecting the ability of farmers to harvest crops. This is pushing food prices higher as supply suffers.
“This summer is on track to be the hottest recorded on Earth,” Barron’s reported, noting that harsh weather conditions “are creating risks to food production.”
“Heat waves destroy crops and threaten to drive up food prices,” the article added. “Food insecurity is the ‘new normal’ with climate change pointing to recurring crises and structurally higher agricultural commodity prices,” according to J.P. Morgan’s chair of global research Joyce Chang.
Of course, Russia’s invasion of Ukraine brought to light the global food crisis. Exports out of the Black Sea were affected due to Russia’s occupation of crucial sea ports. The U.S. Department of State (DOS) is fully aware of the food crisis and confirmed that the current weather conditions will add to the aforementioned food insecurity.
“Global food demand will increase by more than 50 percent in 2050, but due to climate change, agriculture yields of major crops could decrease over that same period,” the DOS said. “This dangerous combination could lead to price spikes, food insecurity, social unrest, political tensions, and conflict.”
Getting Agricultural Commodities Exposure
In the meantime, as agricultural commodity prices rise, short-term traders or long-term investors can use the Teucrium Agricultural Fund (TAGS), which is essentially a fund of funds, and it features a low 0.13% expense ratio. It combines exposure to corn, wheat, soybeans, and sugar through other Teucrium funds that focus specifically on these commodities.
The funds featured in TAGS:
- The Teucrium Corn Fund (CORN)
- The Teucrium Wheat Fund (WEAT)
- The Teucrium Soybean Fund (SOYB)
- The Teucrium Sugar Fund (CANE)
Of course, if investors want specific exposure to a particular commodity, such as corn, wheat, soybeans, or sugar, they can invest in those funds individually. Looking at TAGS specifically, it’s been outperforming the broader S&P GSCI Agriculture index by about 14% for the year, which is remarkable given that overall, agricultural commodities have been trending lower in 2023.
For more news, information, and analysis, visit the Commodities Channel.