At the time of our late May piece on the space, DBA was trading in the high $19’s, and the fund continued to dip all the way below $19, before suddenly shooting up as high as $20.30 in intraday trading just yesterday (before today’s more than 1% sell-off in the space).
A Bloomberg.com article titled “Food Prices Near 2-Year High Thanks to a Record Surge in Butter and Wheat” illustrates what has been occurring in the space rather well and points out Mother Nature’s recent role in rising “Ag” prices. Wheat prices specifically have been driven by drought conditions, and one can see the sudden move higher in Wheat linked ETF WEAT (Teucrium Wheat Fund, Expense 1.00$, $81 million in AUM) which has moved above $8 after trading at $7 just seven trading sessions ago.
DBA presently has its highest weighting in Live Cattle (15.90%) and its second highest weighting is in Wheat (14.30%), so the fund has clearly benefited from what we have spoken about here in terms of rising prices in the group. The Bloomberg article further states “Limited export availability in the dairy market has made products including butter and cheese more expensive.”
The month of June saw net price changes that in some cases were a record, such as the 14% leap in Butter prices in one month. Bloomberg notes that Meat prices spiked 1.8% and up for the sixth straight month, while Grain prices moved more than 4% higher during this time frame.
All of this talk about “Food” has us looking at an obscure but useful ETP known as FUD (ETRACS CMCI Food Total Return ETN, Expense Ratio 0.65%, $5.3 million in AUM). FUD only averages about 500-600 shares traded daily and seems to fly unnoticed on most radars. On some days it doesn’t even trade at all, but it is the only “Food” oriented commodity product in the greater Agriculture landscape.
Fund literature states that “The Index measures that collateralized returns from a basket of 11 futures contracts from the agricultural and livestock sectors.” Currently the highest weightings in the fund are as follows: 1) Soybeans (19.62%), 2) Sugar (15.01%), 3) Corn (14.69%), 4) Live Cattle (7.80%), and 5) Soybean Meal (6.63%).
The ETRACS CMCI Food Total Return ETN (NYSE:FUD) was trading at $19.40 per share on Thursday morning, up $0.55 (+2.92%). Year-to-date, FUD has declined -1.92%, versus a 8.13% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.