Capitalize on Water Shortages With Grain ETFs

When Boone Pickens, the world famous oil investor, announces that he is investing in water rights, it is time to take note.

Clearly we have a rising global population, a declining supply of fresh water, agriculture (crops use about 80% of U.S. water) using an increasing portion of water and the dollar dropping increasing global grain prices.

There may be a unique asset category that picks up on all of these trends at once, and is also supported by indefinitely rising global demand. It is the grains. There are grain ETFs that now provide this opportunity.

As emerging middle class families come into being in countries throughout the world, the first thing that they will want is more and better food. The grains are uniquely positioned to benefit from this trend.

The grains, unlike gold or other kinds of commodities, don't rely on a crisis, or new homebuilding, or many of the other variables that other commodities require. As the water supply worldwide becomes a bigger problem, it will accelerate the increases in grain prices.

It is one way that I can think of to be a participant in the coming age of water wars.

Disclosure: Author is an investor in the Rodgers Holdings portfolio of grains and metals (RJA) and (GRU)

Comments

[john haskell:]

Amen, brother! 1000 tons minimum of water are required to grow 1 ton of wheat. Water "long" countries such as Brazil and Russia will prosper at the expense of water "short" India and China.

2008 Feb 26 02:34 PM

[SavCD:]

John,

You are so right. Most people don't know what you know.

The other time bomb is Mexico.

2008 Feb 28 11:20 PM

[Todd King:]

These two ETNs have severely underperformed the corn, soybeans, and wheat futures. They're off by about 20% in only the past three months. How can this be? Is this just inherent in any commodity ETF/ETN, that they're at great risk of severely underperforming (and never over-performing) their "benchmark" future? We saw the same thing with USO & oil futures.

2008 Jun 19 10:59 AM

[Todd King:]

Oops - I think I made a mistake. Wheat is actually a little under the ETNs, and I think that wheat is the biggest portion of this index. I'd have to calculate it all out to see how it's performing doing against its index (which is probably not going to happen :)

2008 Jun 19 11:08 AM

[Jake Berzon:]

John, much of the wheat grown in the US and practically all of the wheat grown in Kansas and Colorado is dry land farming - no irrigation whatsoever. Not that this takes away from the global water shortage, but just to keep the facts straight...

2008 Sep 19 12:44 AM