"Both short and long-term factos suggest higher agricultural prices," says Leonard Goodall in No-Load Portfolios. Here, the fund expert looks at a pair of agriculture-based ETFs.
"Bad weather through the country has had a negative impact on the agriculture sector. Rain and flooding in the plains states has caused a delay in harvesting the winter wheat crop and other grains are behind in their normal growing season.
"Moreover, current grain supplies are low as compared with demand. These factors point to the possibility of higher grain prices in the months to come.
"Over the longer term, growing world affluence will increase the consumer demand for good, putting upward pressure on grain prices.
"Another factor that has been in the news lately is the potential vulnerability of the world wheat crop to the resistant Ugandan 99 Stem Rust fungus. The fungus is spread by the wind and infections have spread outside Africa to the MIddle East. It is thought that it is just a matter of time before it spreads worldwide.
"The PowerShares DB Agriculture ETF (NYSE: DBA) offers an easy way to invest in grain prices as it holds futures contracts on wheat, corn, soybeans and sugar. The For long-term investors with patience, purchases in the current support range look promising.
"For a heavier weighting on wheat prices within its portfolio, Elements MLCX Grains Index (NYSE: GRU) will appreciate more if wheat prices rise."
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