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  • Commodity Review: How To Profit From Rising Wheat Prices 0 comments
    May 21, 2012 10:14 AM | about stocks: WEAT, ADM, MOO

    Last week, wheat futures jumped 16% - the most since the five days ended June 15, 2007 thanks to dry weather threatening to damage wheat crops in the USA and Russia - two of the world's three biggest wheat producers this year. However, both Russia and the Ukraine are predicted to get showers from now and into tomorrow - helping to ease wheat prices in early futures trading this week.

    Nevertheless, conditions reportedly remain dry in Kansas, a key winter wheat producing state in the USA, plus Australia. Given that wheat has yet to be harvested along with memories of a devastating Russian drought two years ago which caused a big upheaval in the grain markets, commodity traders should be checking their weather forecasts and prepare for a repeat upheaval. Moreover, wheat supplies are said to already be tight as Western Europe has already suffered significant winter damage to its wheat crops.

    In other words, food prices for products that contain wheat may be rising later this year but for stock investors or traders looking for a way to profit from rising wheat prices, there are a couple of options besides betting on wheat futures.

    For starters, the Teucrium Wheat Fund ETV (NYSEARCA:WEAT) from Teucrium Trading, LLC is a commodity pool that offers unleveraged direct exposure to wheat without the need for a futures account (Note: Teucrium Trading, LLC also offers a corn fund, a soybean fund, a sugar fund, a crude oil fund and a natural gas fund). The Teucrium Wheat Fund ETV (WEAT) has a market cap of around $4.6 million while on Friday WEAT rose 4.46% to $20.59 but its still down 8.1% since the start of the year and down 16.2% since last September.

    Less adventurous investors could also invest Archer Daniels Midland Company (NYSE:ADM), a large cap stock involved in procuring, transporting, storing, processing and merchandising agricultural commodities and products like wheat. On Friday, Archer Daniels Midland Company (ADM) fell 1.21% to $31.82 but ADM is still up 11.3% since the start of the year, up 1.8% over the past year and down 13.8% over the past five years. Archer Daniels Midland Company (ADM) also has a forward dividend of $0.70 for a dividend yield of 2.2% - not bad in today's near zero interest rate environment.

    Finally, the Market Vectors Agribusiness ETF (NYSEARCA:MOO) offers investors exposure to broad range of agribusiness stocks just like Archer Daniels Midland Company (ADM). On Friday, the Market Vectors Agribusiness ETF (MOO) fell 1.20% to $46.12 and is down 2.2% since the start of the year, down 13.2% over the past year and up 13% over the past five years.

    Of course, it's important to remember that overly dry or wheat weather in key agricultural regions around the world could also impact the supply and hence the price of other agricultural commodities. That in turn will impact the price food and restaurant stocks pay and if they cannot pass on any price increases to customers, they will need to absorb it at the bottom line.

    This means it's a good idea to check the weather reports this week plus keep an eye on our NextCandle.com stock forecasts for agricultural and food related stocks as any dramatic weather changes that impact the supply and price of wheat may also be felt fairly quickly in the markets.


    Stocks: WEAT, ADM, MOO
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