Three ETFs to Play Rising Grain Prices

Includes: DBA, GRU, JJGTF
by: Kevin_Grewal

Heavy rain in Australia and dry weather in the US are expected to take its toll on global grain production, pushing prices up and providing positive support to the iPath DJ-UBS Grains TR Sub-Idx ETN (JJG), the ELEMENTS MLCX Grains Index TR ETN (NYSEARCA:GRU) and the PowerShares DB Agriculture Fund (NYSE:DBA).

To further add to grain’s appeal, the supply and demand imbalances of global grains are expected to widen as competition amongst major crops for limited acreage amplifies, weather conditions continue to take their toll on global production and demand increases due to population growth and increased global wealth. In fact, the United Nation’s Food and Agriculture Organization expects global wheat stock levels to drop by 10% from last year to 181 million tons.

The primary driver behind wheat’s surge and expected sustainability is harsh weather conditions, which not only have hit Australia and the US, but also taken its toll on Russia, one of the major wheat exporters in the world, resulting in the Kremlin potentially importing feed grain from neighboring countries to meet demand.

At the end of the day, there is a global supply and demand imbalance in a commodity that is essential to life and positive price support is highly likely to push the aforementioned ETFs and ETNs higher.

  • iPath DJ-UBS Grains TR Sub-Idx ETN (JJG), which tracks an index that allocates nearly 23.6% of its assets in wheat futures contracts.
  • ELEMENTS MLCX Grains Index TR ETN (GRU), which tracks an index that holds four grain based commodities including wheat and soybeans.
  • PowerShares DB Agriculture Fund (DBA), which allocates 12.5% of its assets to wheat.

Disclosure: No positions