Global food prices are climbing higher along with energy and precious metals. In May, the Reuters/Jefferies CRB Index, which tracks 19 raw materials including corn, crude oil, and gold, surged by 14 percent — its biggest monthly gain since 1974!
What’s behind this move? Simple: The U.S. government’s massive spending is killing the dollar and setting off inflation. At the same time, China’s massive economy is still growing like crazy. And the insatiable Chinese demand for all kinds of resources looks set to continue despite the global recession.
In last week’s Money and Markets column, I explained how you can trade gold with ETFs. Today we’re going to look at the ways you can play the uptrend in agricultural products — without using futures or options.
Method #1: Buy Individual Agricultural Companies
One way to invest in rising food prices is to buy the stocks of companies in the “agribusiness” sector.
You’ve probably heard of companies like Archer Daniels Midland (ADM), John Deere (DE), Monsanto (MON), and Tyson Foods (TSN).
Of course, individual stock picking takes a lot of time and research. What if you just want to get broad exposure to the whole group?
Then you can use …
Method #2: Buy Agribusiness Stock-Based ETFs!
For instance, take a look at Market Vectors Agribusiness ETF. The ticker symbol is MOO, and it has all the companies listed above plus a few dozen more — including many non-U.S. stocks that are hard to access otherwise.
PowerShares Global Agriculture (PAGG) is another ETF covering this space. Either MOO or PAGG will give you a good cross-section of agriculture-oriented stocks from around the world.
Of course, stock based ETFs — while great — only provide “indirect” exposure to the underlying grains and agricultural products. What if you want direct access to the commodities themselves?
Method #3: Use Commodity-Focused ETFs and ETNs
You can now buy your way into the grain markets just as easily as you buy a stock — without the stress of leveraged futures and options.
For instance, PowerShares DB Agriculture Fund (DBA) tracks an index of four key markets: Corn, wheat, soybeans and sugar. With these in your pocket, you’ll be ready to profit as inflation sends worldwide food prices through the roof.
The iPath Dow Jones-AIG Agriculture Total Return Sub-Index ETN (JJA) is similar to DBA but is a little more diversified, adding coffee, cotton and soybean oil to the mix.
The last broad-based, commodities ETF I want to discuss today is Elements Linked To Rogers International Commodity Index — Agriculture Total Return (RJA).
RJA follows an index of 20 agricultural commodities developed by legendary investor Jim Rogers. It includes all the major markets plus several smaller ones: Canola, orange juice, oats, rubber, live cattle, lumber, cocoa, and more.