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Proprietary Data Insights Financial Pros’ Top Agricultural ETF Searches in the Last Month
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Financial Pros Top Agricultural ETF |
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The expiration of the Russia/Ukraine wheat deal put agriculture back in the news. While wheat futures rose, the reaction was noticeably mild…which got us thinking… This week, we looked into the top agricultural ETF searches by financial pros. At the head of the list is Invesco’s DB Agriculture Fund (DBA). If you’re not all that familiar with it or the other funds on our list, you’ll quickly understand why these aren’t great investment products. Key Facts About DBA
Right off the bat, you’ll notice that DBA doesn’t show any holdings. This isn’t technically true. DBA, like the other ETFs on our list, holds futures contracts – leveraged instruments tied to the spot price of the commodity with an expiration date. The fund owns a combination of commodity futures from sugar to cotton, with treasury bonds to back up their futures holdings.
Funds must roll futures positions as their holdings expire, like option contracts. Typically, that means selling their current month’s expiration at once price and buying the next expiration at a higher price. Over time, this erodes the net asset value of the fund. But for the short term, it’s a way to gain exposure to the price fluctuations of the commodity. Performance The DBA is one of the worst performing funds in our list, garnering an average return of just 3.21% over the last five years. And over a decade, you’d have lost money.
That said, because of Covid and the commodity boom cycle, the last three years have been rather lucrative. Competition DBA is the only major broad-based agricultural fund. The others on our list were commodity-specific, all from Teucrium.
While all the funds use futures to track the price of the underlying commodity, some, like SOYB, are more expensive than others. Generally speaking, liquidity on most of these ETFs is pretty low.
Our Opinion 2/10 We’re not a fan of using these ETFs to gain exposure to commodities. While futures are the only direct way, over time, the roll will cost money. Instead, we’d prefer to invest in companies that would benefit or suffer from the price changes in these commodities. While not as direct, it doesn’t have the built-in price erosion from futures contract rolls. |
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