4 ETFs Likely To Be Impacted By US Corn Production (CORN, DBA, MOO, PAGG, POT, DE, MON, MOS)
According to the latest data reported by the U.S. Department of Agriculture, U.S. farmers are expected to increase corn production, which could potentially influence the Teucrium Corn ETF (NYSE:CORN), PowerShares DB Agriculture Fund (NYSE:DBA), Market Vectors Agribusiness (NYSE:MOO) and PowerShares Global Agriculture (NYSE:PAGG).
Major imbalances in supply and demand have pushed agriculturally-based commodity prices such as corn, wheat and cattle through the roof. Inclimate weather around the world has taken its toll on production, while increasing purchasing power in developing nations, coupled with growing populations around the world, has pushed up demand. In fact, the USDA reported earlier this year that corn reserves were at a 15 year low. Corn is a vital commodity due its uses in packaged foods and its importance in livestock production. Corn is often used by farmers and ranchers to fatten up their herds of cattle and chicken to produce more meat, eggs and milk.
To help curtail the supply woes, the USDA has indicated that that farmers intend to plant 92.2 million acres of corn this spring, a 5 per cent increase over last year. That would make it the second-biggest corn crop since 1944, after a record-setting planting in 2007.
Although U.S. farmers are expanding corn production, prices are still expected to remain elevated due to increased demand. The United Nation Food and Agriculture Organization estimates the world population to swelter to 9 billion over the next 40 years pushing organic demand for food up. Furthermore, consumers in developing nations are witnessing increasing purchasing power and a widening middle class giving them the ability to consume more meat, dairy and grains than ever before. As for the future of these nations, the International Monetary Fund expects emerging markets to continue to be at the forefront of economic growth, therefore supporting demand for livestock, dairy and grains. Lastly, a rebounding U.S. ethanol industry and President Obama’s focus on alternative energy could further support increased demand for corn.
As mentioned above, some ETFs that will likely be impacted by corn production include:
- Teucrium Corn ETF (NYSE:CORN), which is a pure play on the corn markets and utilized corn futures contracts as its holdings.
- PowerShares DB Agriculture Fund (NYSE:DBA), which is a diversified play on agricultural commodities. DBA allocates nearly 11 % of its assets to corn futures.
- Market Vectors Agribusiness (NYSE:MOO), which includes companies such like Potash (NYSE:POT) and Deere (NYSE:DE) in its top holdings, which are indirectly influenced by corn production and prices.
- PowerShares Global Agriculture (NYSE:PAGG), which is also likely to feel the impact of corn production and prices through its holdings, which include Monsanto (NYSE:MON) and the Mosaic Company (NYSE:MOS).
Written By Kevin Grewal From ETF Tutor Disclosure: Long DBA
Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net, where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfoliosdealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor’s degree from the University of California along with a MBA from the California State University, Fullerton. He is a contributing author on The Street – his articles can also be found published on various sites including Yahoo! Finance, The Globe and Mail , Daily Markets, MSN Money, Seeking Alpha, Fidelity Investments, Traders Library, and Minyanville.