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danielosborne
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I am an investment professional currently working for the amazing Wall Street Bad Boys.
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  • Commodity Review: How Stock Investors Can Speculate On Food And Agricultural Commodities  0 comments
    Apr 2, 2012 10:31 PM | about stocks: MOO

    If you are the person in your household who does the grocery shopping, you have probably noticed first hand the rising cost of food but how can an investor profit from the rising cost of many agricultural commodities that go into food?

    To first put things in perspective, there was an extensive article in Sunday's Independent about how investments in food commodities by both banks and hedge funds have risen from $65 billion to $126 billion over the past five years. This investment or speculation has helped to push up food prices to 30 year highs and is being blamed for causing sharp price fluctuations as well as increasing hunger. In fact, the article noted that Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Barclays Capital (NYSE:BCS) are now the largest players in food commodities markets with purely financial players now accounting for 61% of the investment in the wheat futures market.

    However, ordinary investors can also find ways to profit from rising food prices (and perhaps offset their own food bills) and they do not need to invest directly in agricultural futures and commodities. One easy way would be to invest in an ETF like the Market Vectors Agribusiness ETF (NYSEARCA:MOO) which seeks to replicate the performance of the DAXglobal Agribusiness Index (DXAG). The Market Vectors Agribusiness ETF is up about 13.75% since the start of the year, down 5.6% over the past year and up 31.5% over the past five years and its top 15 holdings includes the following agricultural stocks:

    1. Monsanto (NYSE:MON)
    2. Potash (NYSE:POT)
    3. Deere & Co. (NYSE:DE)
    4. Syngenta AG (SYNN)
    5. Wilmar International (NYSEARCA:WIL)
    6. Archer-Daniels (NYSE:ADM)
    7. The Mosaic Co. (NYSE:MOS)
    8. Brasil Foods (NYSE:BRFS)
    9. Yara International (YAR)
    10. Afrium Inc. (NYSE:AGU)
    11. Kubota (6326)
    12. CF Industries (NYSE:CF)
    13. IOI Corp Bhd (IOI)
    14. Bunge Ltd (NYSE:BG)
    15. CNH Global NV (NYSE:CNH)

    Another investment idea would be commodities trading giant Glencore International Plc (GLEN) but it trades on the London exchange and it's about neutral since the start of the year and down 22% since its IPO last May. However, it's worth noting that Glencore International Plc (GLEN) has recently announced that it will acquire Viterra (NYSEARCA:VT), a Canada based vertically integrated global agri-business company - a sign that mergers and acquisitions in the agricultural commodity space will likely increase in the future. On the other hand, it's also worth noting that Potash Corporation of Saskatchewan (POT), a Canadian integrated producer of fertilizer, industrial and animal feed products, was offered over $38.0 billion by Anglo-Australian mining giant BHP Billiton (NYSE:BHP) to be bought back in 2010 but the deal was blocked by the Canadian government who deemed the company too strategically important to fall in foreign hands.

    Finally, another albeit indirect way for investors to have exposure to agricultural commodities would be to invest in closed-end country funds or ETFs of countries that are large scale agricultural producers and exporters. A few that come to mind include the Global X FTSE Argentina 20 ETF (NYSEARCA:ARGT), the Aberdeen Australia Equity Fund (NYSEMKT:IAF), the iShares MSCI Canada Index Fund (NYSEARCA:EWC), the Chile Fund (NYSEMKT:CH) and the iShares MSCI Brazil Index Fund (NYSEARCA:EWZ) but obviously the economies of these countries goes beyond just agriculture commodities. Nevertheless and if agriculture commodity prices remain high over the long term, as they appear set to do so, the economies of these countries will surely benefit.

    In the mean time and even if you don't already own any of the above mentioned ETFs, funds or stocks, you might want to add a few to your NextCandle.com my portfolio page to keep an eye on them because after all, a profitable investment in one may help to offset the your rising food bills due to rising agricultural commodity prices.

    NOTE: THIS PIECE WAS JUST POSTED ON OUR BLOG AT http://www.nextcandle.com/blog/2012/04/commodity-review-how-stock-investors-can-speculate-food-and-agricultural-commodities
    Stocks: MOO
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