 |
| Commodity Futures Trading Commission (Photo credit: Wikipedia) |
The world food prices including cereals, oilseeds, dairy, meat and sugar are surging to new highs due to the scorching heat and the worst U.S. drought in nearly a half-century (read: Bet on Higher Food Prices with These Three ETFs).
The bad weather has also resulted in the worst wheat harvest since the late 1980s. In fact, harvest levels of this key crop dropped 14% on average this year further underscoring the issues that this corner of the market is seeing.
The cost of dairy costs jumped the most in more than two years. Livestock breeders and dairy farmers are now continuously passing on the increased cost of feed to consumers, suggesting there is still more hikes to come.
If that wasn’t enough, in June and July, a heatwave in Russia and a major drought in that key grain growing nature led to higher prices as well, as 45% of the corn and 35% of the soybean crop were destroyed (read: How Do You Invest for the Coming Crop Crisis?).
The hike in food prices forebodes gnawing hunger for a slice of the American population. Americans on lower incomes are consuming less food due to 30% appreciation in the prices of fruit, milk, cheese and egg.
Unfortunately, relief doesn’t appear to be coming anytime soon either, as according to a recent data from the U.S. Department of Agriculture, Americans expect to pay 3-5% more on groceries next year too.
In other words, there seems to be little relief in sight for high food prices. This is especially true with another round of monetary stimulus from central banks in many countries flowing into the markets, thus weakening the dollar and giving even more strength to commodity prices in the near term.
Investors concerned about the uptick in food prices, particularly if the drought continues and crop yields continue to plummet, might want to watch these four ETFs outlined below (see more ETFs in the Zacks ETF Center). These funds could be especially impacted by any continued trends in food prices, and particularly if prices continue to ascend in the near future.
Investors seeking a broad play on the food segment of the commodity market should find FUD an intriguing choice. Launched in April 2008, the product provides wide exposure to a portfolio of agricultural and livestock commodity futures through a single investment. The commodity futures contracts are diversified across three constant maturities from three months up to one year.
The note tracks the performance of the UBS Bloomberg CMCI Food Index Total Return index, net of fees and expenses. The fund holds 10 commodities in the basket, all of which can be classified as ‘softs’. Top holdings include sugar (24%), soybeans (19%) and corn (16%) while other in-focus commodities also make an appearance in the product as well (read: What Happened to the Sugar ETF?).
The product charges 65 bps in fees per year from investors. Despite the lower fees, volume is unfortunately quite bad in the note, coming in at about 7,700 shares a day.
This means that investors have to pay extra cost in the form of wide bid/ask spread. The ETN has posted remarkable performance so far this year, yielding over 9% returns (as of October 12) and attracted $27.9 million worth of assets. ... Continue to read.
No comments:
Post a Comment