Lead by the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (JO) , which is up nearly 81% year-to-date, five of this year’s top-10 non-leveraged exchange traded products offer exposure to agriculture or soft commodities.
The iPath Dow Jones-UBS Softs Total Return Sub-Index ETN (JJS) and the iPath Dow Jones-UBS Grains Total Return Sub-Index ETN (JJG) are also on the list. The equity-based Market Vectors Agribusiness ETF (MOO) is not, but MOO has the makings of a value play and has recently been showing signs of life. [Agribusiness ETF Could Rise Again]
Agriculture and soft commodities futures have been bolstered by poor weather in various parts of the world. For example, drought conditions in Brazil have sparked JO higher while a harsh winter in parts of the U.S. boosted wheat prices. [Brazil Drought Lifts Coffee ETNs]
However, the trickle down impact from the futures market to agriculture-related stocks, such as those held by MOO, can take a while to materialize.
The benefits for companies of rising commodities are often “delayed or not immediate,” Jake Dollarhide, the chief executive officer of Longbow Asset Management, told Elizabeth Campbell of Bloomberg. Dollarhide said MOO’s constituents can be considered value plays , adding “Eventually, they’ll follow agricultural prices higher.”
Although MOO has lagged the broader market for much of the multi-year rally in U.S. equities, the ETF has recently shown signs of strength. Over the past 90 days, MOO is up more than 6% and is trading at its highest levels since late December 2013.
A mix of 53 stocks that reside primarily in the industrial and materials sectors, MOO has benefited from the shift to value from growth.
Shares of Deere (DE) are up 5.6% in the past month and the stock trades at just 12.2 times forward earnings. Shares of Potash (POT), one the largest makers of its namesake crop nutrient, have surged 12.6% over the past three months and the stock trades at 17.6 times forward earnings. Those stocks combine for 14% of MOO’s weight. [Potash Recovery Should Help These ETFs]
Market Vectors Agribusiness ETF