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4 Agriculture ETF Areas At a One-Year High: Here's Why

After a decade of underperformance, commodities are experiencing a huge rally this year thanks to optimism over global economic growth, reflation trade, widespread vaccination, the chances of approval of more COVID-19 antiviral pills and supply chain disruptions. Invesco DB Commodity Index Tracking Fund DBC is up 45.3% this year.

If this is not enough, several agricultural commodities specifically surged lately due to weather concerns. Invesco DB Agriculture ETF DBA has gained 2.4% in the past five days against 0.9% gains in SPDR S&P 500 ETF SPY. Below we highlight a few key winners which include iPatha.B Coffee Subindex TR ETN JO, Teucrium Sugar ETF CANE, iPatha.B Cotton Subindex TR ETN BAL and Teucrium Wheat ETF WEAT.

Coffee

Coffee prices are super-hot lately asa supply crunch from Brazil to Vietnam pushed coffee prices to a seven-year high. Inclement weather, shipping disruptions and rising fertilizer costs are weighing on supplies.

The latest rally came after a decline in certified stockpiles and a firmer Brazilian currency that cut incentives to sell commodities priced in greenbacks. In addition, early projections for the country’s 2022 crop indicate yields will trail the nation’s last high-yielding cycle in 2020-21. That will prevent the rebuilding of stockpiles needed to weather the natural dip in the following harvest’s output.

iPatha.B Coffee Subindex TR ETN JO in Focus

The iPatha.B Coffee Subindex TR ETN jumped 3.49% on Nov 17. The underlying Bloomberg Coffee Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on coffee.iPatha.B Coffee Subindex TR ETN charges 45 bps in fees (read: 5 Reasons for the Commodity Boom: ETFs to Play).

Cotton

Global cotton prices are trading at the highest level in the last 10 years. The United States is the largest exporter in the world and the stock piles have declined 4% — the lowest in a year. American harvest is also down 6% as compared to the average in the last many years and this is creating a potential supply crunch. Inclement weather, including droughts and heat waves have weighed on cotton crops across the United States.

Data from Cotlook shows that the global deficit could double in the next year from where we stand right now, at around 122,000 tons to around 207,000 tons next year, per the CNBC article. Another key producing region India is also suffering from lower sowing and a disturbed monsoon season. Last year, the exports were really strong. However, the expectation is that in this season exports could actually fall 38%, per the same article.     

iPatha.B Cotton Subindex TR ETN BAL in Focus

The underlying Bloomberg Cotton Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on cotton.iPatha.B Cotton Subindex TR ETN charges 45 bps in fees. BAL was up 2.1% on Nov 17 (read: Cotton Prices Hit a 10-Year High: ETFs to Gain/Lose).

Sugar

Raw sugar futures on ICE has been trading at the highest since February of 2017, due to forecasts of tight supplies and long investment positions.Rabobank analysts said Brazil could see a sugarcane shortage next year due to inclement weather which will affect output, limiting the possibility of increasing exports. After having jumped about 30% this year, sugar prices in the global market will likely remain steady next year mainly due to weather concerns.

Teucrium Sugar ETF CANE in Focus

The underlying ICE No. 11 Sugar Futures Contract looks to reflect the daily changes of a weighted average of the closing prices for 3 futures contracts for sugar that are traded on ICE Futures US. The expense ratio of Teucrium Sugar ETF is 1.88%.

Wheat

Chicago wheat futures traded over $8.3 a bushel, the highest since December 2012, due to falling supplies in the Northern Hemisphere. The world’s largest exporter, Russia, saw outbound shipments of wheat between Jul 1 to Nov 11 sliding 16% year over year, as Moscow continues to hike tax rates on wheat exports to lower domestic food inflation. Meanwhile, another key growing region Canada’s wheat output in the marketing year is expected to fall 38% year over year due to adverse weather. All these pulled global stocks for the wheat down to a 6-year low, per tradingeconomics.

Teucrium Wheat ETF WEAT in Focus

The underlying Wheat Futures looks to reflect the daily changes of a weighted average of the closing prices for 3 futures contracts for wheat that are traded on the CBOT: the second-to-expire contract, the third-to-expire contract and the contract expiring in the December following the expiration month of the third-to-expire contract. The expense ratio of WEAT is 1.91%.


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SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Invesco DB Commodity Index Tracking ETF (DBC): ETF Research Reports
 
iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO): ETF Research Reports
 
iPath Series B Bloomberg Cotton Subindex Total Return ETN (BAL): ETF Research Reports
 
Teucrium Sugar ETF (CANE): ETF Research Reports
 
Invesco DB Agriculture ETF (DBA): ETF Research Reports
 
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