Liquid Alternatives: Why the Risk-Reward on Grain ETFs Makes Sense
Agricultural commodities offer diversification out of a traditional portfolio and generate uncorrelated returns.
Speaking to Tom Lydon at the Inside ETFs conference, Sal Gilbertie, CEO, Teucrium, observed that agricultural commodities such as grains were an excellent diversifier. (ETF Trends)
Giving an interesting insight, Gilbertie said that grains outperformed the S&P500 in 11 out of 12 instances when the index fell by 10% or more.
Observations on grains
In other comments on the chat, Gilbertie said favorable weather had ensured a plentiful supply of grains in the past seven years or so. Grains have therefore been bearish in recent times.
But the probability is mounting that there a bad weather year could be round the corner. Corn, for instance, has doubled twice within the past 13 years due to instances of drought.
Grains can deliver substantial alpha, said Teucrium’s Gilbertie, “when it stops raining.”
Further, grains such as soybean and corn have been trading at the cost of production because of market volatility from trade wars, he observed.
Meanwhile, analysts believe that grains are negative year-to-date and the virus is, of course, an important factor. However, their recent price decline has more to do with supply chain disruptions rather than demand destruction.
Jim Rogers on agriculture
Commodity guru Jim Rogers observes that farmers are now much older, on average, around the world. And that fewer and fewer people are training in agriculture.
In his opinion, the situation in agricultural commodities is shaping up for “structural undersupply” accompanied by a shortage of skilled and migrant workers.
ETFs to bet on grains
Given all the above factors, the risk-reward profile for a long-term on grains appears favorable, and an ETF could a suitable vehicle for that thesis.
Teucrium offers a suite of ETFs including the following grain ETFs. Investors should note that the ETFs invest in futures contracts, not the spot market:
|ETF name||Ticker (NYSEARCA: )||YTD change %||% (Near/Next/Far Contracts)|
|Teucrium Corn Fund||CORN||-18.78||35/30/35|
|Teucrium Wheat Fund||WEAT||-8.38||35/30/35|
|Teucrium Soybean Fund||SOYB||-13.01||35/30/35|
|Teucrium Sugar Fund||CANE||-23.01||35/30/35|
|Teucrium Agricultural Fund||TAGS||-17.79||35/30/35|
Latest Alternative Investment News
Global early-stage venture capital firm Bessemer Venture Partners announced Thursday its raise of $3.3 billion across two new funds. BVP XI, which collected $2.475 billion, will focus on early-stage companies…
SS&C ALPS Advisors have launched an actively managed, semi-transparent ETF that focuses on the U.S. REIT securities market. The ALPS Active REIT ETF (REIT) will trade on the NASDAQ.
Atom Bank, which is based in Durham, U.K., plans to raise £40 million from its existing shareholders in a move to achieve profitability within a year. The digital bank also…
Federally chartered digital bank Anchorage announced Thursday its Series C raise of $80 million led by GIC, Singapore’s sovereign wealth fund, with participation from a16z, Blockchain Capital, Lux, and Indico.