Cashing In on China’s Food Demand With ETFs (CORN, WEAT, SOYB, ADM, BG)

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January 14, 2013 3:49pm NYSE:CORN NYSE:SOYB

Tony Daltorio: When looking for hot spots for investing in 2013, investors must consider this major trade shift happening in China.


You see, China is the world’s largest consumer of grains. That’s not surprising considering China’s population is 1.3 billion, with an additional 8 million children born each year.

China historically has been largely self-sufficient in most grain categories, rarely importing products like corn and wheat.

But that is changing

China is becoming a net importer of grains.

As Rabobank (one of the largest lenders in global agribusiness) analyst Erin FitzPatrick told AgriMoney, “This is something that the market should be looking at.”

Here’s why.

Global Effects of Chinese Grain Imports

As China imports more agricultural products, global demand for commodities like wheat, rice, barley and corn will rise – and so will their prices.

A good example of this shift in China is wheat.

China had not been a major wheat importer since the 2004-05 crop year. But in the 2012-13 crop year, China is expected to import over 3.6 million tons of the grain.

In fact, the country’s overall grain imports tripled in the year through November from just a year earlier. Imports rose from just 4.5 million metric tons to a whopping 13.4 million metric tons.

Corn and soybean imports in China also are growing as more and more of the country’s consumers can afford to buy meat.

China’s meat consumption grew 9.2% per year over the past decade. That translates into the need for more animal feed, which in turn means the need for more soybeans and to a certain extent corn.

One of the world’s largest food trading companies, Louis Dreyfus Commodities, told the Financial Times that a surge in Chinese corn imports was a “game-changing move.”

“For China to lose even a little bit of self-sufficiency means a lot on the trade front,” Jean-Yves Chow, another analyst at Rabobank, told the Financial Times. “Even if China imports 5 percent of their corn, that is equivalent to one third or one half of the corn trade in the world.”

China is expected to import about 63 million metric tons of soybeans in 2013. To put that into perspective, Iowa grows only 13-15 million metric tons of soybeans per year.

This is good news for American farmers.

The U.S. Department of Agriculture says China will remain the largest importer of U.S. agricultural products in the 2013 fiscal year. It is expected to import in excess of $21 billion worth of U.S. agricultural goods.

This is especially true in the light of poor wheat crops in Russia and the Ukraine, which will be unable to meet China’s increased grain demand.

Investing in 2013: Cash In on China’s Food Demand

This change is good news for investors who are aware of this shift now and buy into commodities before prices rise.

Prices for grains – corn, wheat and soybeans – can be tracked through the use of exchange-traded funds (ETFs).

In fact, Teucrium has an ETF for corn, wheat and soybeans. In each case, the ETF holds futures contracts on the particular grain. Here is the list:

  • Teucrium Corn Fund (NYSEARCA:CORN)
  • Teucrium Wheat Fund (NYSEARCA:WEAT)
  • Teucrium Soybean Fund (NYSEARCA:SOYB)

Another way to play this trend in 2013 is to buy some of the major global grain traders such as Archer Daniels Midland Co. (NYSE:ADM) and Bunge Limited (NYSE:BG).

These two firms are part of the so-called ABCD group of grain traders, which includes the four companies that dominate the industry. Archer Daniels is the A, Bunge the B, Cargill Inc. is C and Louis Dreyfus is the D. The latter two are private companies.

Archer Daniels attempted to expand its presence in the Asia-Pacific region recently with a hostile takeover offer for Australian grain trading firm GrainCorp. Bunge is a major force in Brazilian agriculture, which along with the U.S., will benefit from China’s hunger. It enjoyed robust profits in 2012 thanks to the U.S. drought.

Written By Tony Daltorio From Money Morning

Your Guide to Financial Freedom. We’re in the midst of the greatest investing boom in almost 60 years. And rest assured – this boom is not about to end anytime soon. You see, the “flattening of the world” continues to spawn new markets worth trillions of dollars; new customers that measure in the billions; an insatiable global demand for basic resources that’s growing exponentially; and a technological revolution even in the most distant markets on the planet. And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact, we believe this is where the only real fortunes will be made in the months and years to come.


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