The agriculture sector has long been a popular place for commodity trading. After all, it was with agricultural futures that commodity trading got its start. Farmers had originally used these contracts to help offset any losses in crop yields. Now, the agricultural space has blossomed into a market chock full of options for investors, but many investors are still unaware of the vast opportunities that this sector offers. [Let us change all that!] Words: 2376
So say Jared Cummans and Daniela Pylypczak (www.commodityhq.com) in edited excerpts from their original article* which Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) below for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
They go on to say, in part:
No matter what kind of investor you are, there is certainly an agriculture/agribusiness option that fits your investment style. Below, we outline 50 ways to invest in agriculture to help investors pick the correct security for their portfolio: [You will also find The “Ins” and “Outs” of Investing in Commodities of particular interest.]
Futures were the original method for obtaining exposure to commodities. These contracts can be difficult to understand and require a rather complex futures account, so they are not meant for the average investor. For those who fully understand the nuances of these contracts, [however,] futures can be one of the most powerful trading tools for an investor as they offer exposure that, in some cases, can be found nowhere else in the market. The following futures contracts are offered on various exchanges at the CME Group:
1. Cocoa (CJ): These futures, which are not optionable, are quoted in U.S. dollars and cents per ton. Each contract represents 10 metric tons with exposure reaching out to the end of 2013. Those interested in cocoa should look to West Africa as the biggest price driver, as this is where the majority of the world’s cocoa is produced.
2. Coffee (KT): These futures, which are not optionable, are traded on the NYMEX and are quoted in U.S. dollars per pound. Each coffee contract represents 37,500 pounds and trading is conducted in March, May, July, September, and December.
3. Corn (ZC): These optionable futures are among the most popular agricultural contracts. The contract symbol changes based on what month the future expires, but each contract represents 5,000 bushels, or 127 metric tons. The contracts are priced in cents per bushel.
4. Cotton (TT): Another soft commodity, cotton contracts are relatively popular as far as volume is concerned. Contracts are quoted in U.S. dollars per pound with each contract representing 50,000 pounds.
5. Lean Hogs (HE): Hogs are another popular contract, as they offer both futures and options on contracts. Each contract represents 40,000 pounds or 18 metric tons with the pricing unit being quoted in cents per pound. These futures are traded on the CME.
6. Live Cattle (LE): Similar to lean hogs, these futures appear on the CME. Likewise, they are also quoted in cents per pound, are optionable, and each contract represents 40,000 pounds or 18 metric tons.
7. Oats (ZO): These CBOT contracts are optionable and are quoted in cents per bushel. Each contract of oats is representative of 5,000 bushels or 86 metric tons. The futures have contracts that expire in March, May, June, July, September, and December.
8. Random Length Lumber (LBS): These contracts are both optionable as well as futures-based, and are offered on the CME. Each contract represents 110,000 board feet and the pricing unit is represented by dollars per 1,000 board feet (mbf).
9. Rough Rice (ZR): Rice futures are offered on the CBOT and their symbol will fluctuate based on which month you are buying. The futures are quoted in cents per hundred weight and each contract is comprised of 2,000 hundredweights or 91 metric tons.
10. Soybeans (ZS): These CBOT futures extend exposure all the way out to November of 2015. Each contract is priced in cents per bushel with each future being representative of 5,000 bushels or 136 metric tons.
11. Sugar (YO): The final soft commodity, Sugar No. 11 is traded on the NYMEX and offers contracts for March, May, July, and October. Each future represents 112,000 pounds with prices quoted in U.S. dollars per pound.
12. Wheat (ZW): Wheat futures are traded on the CBOT and currently extend exposure out through 2014. Each contract, which is optionable, represents 5,000 bushels or 136 metric tons, with prices quoted in cents per bushel.
Investing the equity side of the equation isn’t always pure play on agriculture, but it can make for a number of interesting opportunities that other investment vehicles simply don’t offer. Equities that focus on these commodities will most often consist of farming and production companies which can offer a number of advantages over other options. A fair amount of these companies offer strong dividend options and high liquidity for traders of all kinds: [Also read Here’s Why Agricultural Stocks Are a Better Buy! and 7 Agricultural Stock Buying Opportunities]
13. Monsanto Company (MON): This seed producer is a staple name of the agriculture sector.
14. Potash Corporation of Saskatchewan (POT): Potash is a fertilizer company which distributes its products primarily in the United States and Canada.
15. Deere & Company (DE): Deere is a well-known name in the agribusiness sector with its production of machinery for agriculture and forestry industries across the world.
16. Mosaic Company (MOS): Based in Minnesota, this company derives its main revenues from producing crop nutrients for the agriculture industry.
17. Archer-Daniels-Midland (ADM): ADM will make for a nice global play, as the firm stores, transports, and merchandises agricultural commodities all around the world.
18. Agrium Inc. (AGU): Similar to Mosaic, Agrium also produces soil nutrients as well as other industrial and specialty products across the world. The company is based in Canada…
19. CF Industries Holdings (CF): Like many other firms on the list, this company and its subsidiaries manufacture nitrogen and phosphate fertilizer products for agricultural and industrial consumers around the world.
20. Bunge Limited (BG): The company has its hands all around the agricultural sector, though its main business comes from the purchase, store, transport, processing, and sale of agricultural commodities.
21. Terra Nitrogen Company (TNH): The company, as the name would suggest, primarily deals with the production and sale of nitrogen-based fertilizers.
22. Cosan Limited (CZZ): This Brazilian-based firm handles the logistics and sale of agricultural property to areas like Europe, Asia, and the Middle East.
23. Scotts Miracle-Gro Company (SMG): This household name is one of the more popular fertilizer producers in the United States.
24. Compass Minerals (CMP): This firm engages in the production of inorganic mineral products in North America and the UK. CMP is divided into two segments: Salt and Specialty Fertilizer, making it an indirect play on the agribusiness sector.
25. Intrepid Potash (IPI): This firm produces and markets potash, or potassium chloride, which is a key ingredient in many fertilizers.
26. Fresh Del Monte Produce (FDP): Another indirect play, this company is based in the Cayman Islands and handles the production, transportation, and distribution of fresh fruits and vegetables around the world.
27. Raven Industries (RAVN): Raven is something of a jack-of-all-trades as it has operations outside of the agricultural sector, including involvement in the construction and military industries.
28. Adecoagro S.A. (AGRO): Though this firm is technically headquartered in Luxembourg, it operates in South America. AGRO plants, harvests, and sells agricultural commodities like corn, wheat, soybeans, cotton and many others. This young stock may be a good growth opportunity for those looking for a long term play.
29. Industrias Bachoco (IBA): Stationed in Celaya, Mexico, IBA operates as a poultry producer, including the breeding, processing, and marketing of chicken.
30. Cal-Maine Foods (CALM): This company deals with the packaging and distribution of various kinds of eggs.
31. The Andersons (ANDE): This company, based in Ohio, dedicates a significant amount of its assets to the agriculture sector including plant nutrients, turf products, grains, and ethanol.
32. Dole Food Company (DOLE): Dole is well-known for their wide production and distribution of fresh fruits and vegetables as well as packaged foods.
33. Cresud (CRESY): This firm is based in Argentina and engages in the production of various agricultural commodities like wheat, corn, soybeans, and others. Cresud does its business almost entirely in Latin America.
34. Tejon Ranch (TRC): This company offers a different approach from some of the other options on the list. This company engages in the development of real estate for agribusiness activities in the U.S. rather than physically producing a specific commodity. [You might find Soros and Rogers Agree: Greater Returns from Farmland Than Gold! Here’s Why of interest.]
35. Yongye International (YONG): This Chinese-based stock researches, develops, and manufactures fulvic acid liquids and powder nutrients for plants and animals.
ETFs have been extremely effective for helping to spread commodities to a number of different investors. While it used to be that only futures traders were able to access this asset class, ETFs have helped the average Joe gain exposure to something like agricultural commodity producers with just one simple fund. When it comes to agriculture, there are ETPs with various investment objectives to give investors exposure to more than just plain-vanilla futures contracts.
36. Market Vectors-Agribusiness ETF (MOO): This fund provides exposure to publicly traded companies worldwide that derive at least 50% of their revenues from the business of agriculture. Though it is only a few years old, its assets have been surging in recent years to make it one of the most popular agricultural products.
37. DB Agriculture Fund (DBA): This ETF invests in futures contracts on some of the most liquid and widely traded agricultural commodities, making it one of the most popular options for achieving exposure to this sector. Some of DBA’s current holdings include contracts on sugar, cattle, coffee, cocoa, soybean and corn.
38. DJ-UBS Grains Total Return Sub-Index ETN (JJG): This ETN is a futures-based product that focuses exclusively on one sector of the agricultural industry; grains. JJG invests in corn, soybeans, and wheat, which are all commodities that often receive minimal weighting in broad-based agricultural or commodity products.
39. DJ-UBS Agriculture Sub-Index Total Return ETN (JJA): JJA invests in the futures contracts related to corn, soybeans, wheat, sugar, soybean oil, coffee, and cotton.
40. DJ-UBS Livestock Total Return Sub-Index ETN (COW): This ETF employs a futures-based strategy to invest in both lean hogs and live cattle.
41. Corn Fund (CORN): This fund is a next-generation commodity product that offers exposure to a number of different corn futures contract.
42. Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL): BAL invests in front-month cotton futures and as such, should be used as more of a trading instrument rather than a buy and hold product.
43. Rogers Intl Commodity Agric ETN (RJA): This product represents the value of a basket of 20 agricultural commodity futures contracts including corn, wheat, cotton, and many others.
44. E-TRACS UBS Bloomberg CMCI Food ETN (FUD): FUD measures a basket of 11 futures contracts from the agricultural and livestock sectors. Investors should note that the fund aims to avoid contango by investing in contracts that mature anywhere from three months to one year.
45. Dow Jones-UBS Sugar Sub-Index Total Return ETN (SGG): Another futures-based product, SGG currently maintains a single futures contract for sugar.
46. Dow Jones-UBS Coffee ETN (JO): This cleverly-named iPath product simply measures front month coffee futures.
47. Dow Jones-UBS Cocoa Total Return Sub-Index ETN (NIB): Another in the line of iPath’s futures products, NIB tracks cocoa futures while charging fees of 75 basis points.
48. Dow Jones-UBS Softs Total Return Sub-Index ETN (JJS): This futures fund maintains exposure to three of the four softs with the following breakdown: Sugar (35.1%), Cotton (33.4%), and Coffee (31.5%).
49. MLCX Grains Index TR ETN (GRU): This fund tracks an index that is designed to provide a benchmark for the grains sector and for investment in commodities as an asset class. The fund is comprised of futures contracts on corn, soybeans, soybean oil, and wheat.
50. E-TRACS UBS Bloomberg CMCI Agric ETN (UAG): This ETN represents the collateralized returns from a basket of 10 futures contracts representing the agricultural sector.
Commodities have obvious appeal to active investors looking to generate profits from short-term price movements [but while] the volatility of this asset class is ideal for risk-tolerant individuals who actively monitor their positions…commodities may also have appeal to the long-term, buy-and-hold crowd…These potentially appealing attributes come with plenty of risk, [however, as] the path to commodity exposure is full of potential obstacles and pitfalls that can erode returns and lead to a less-than-optimal investing experience. Here are ten rules of thumb that will help you achieve a more successful experience investing in commodity markets. Words: 2871
Jim Rogers is one of the most successful investors of all-time…and he buys value. Back in 1999, he predicted that a “supercycle” commodity bull market would see raw material prices advancing for longer than in any previous uptrend led by gold and silver. Gold was trading near its low at $252 and silver at $4 at the time but with gold up 650% from its lows and silver with an even greater gain – obviously Rogers was right. Rogers has now stopped buying gold moving, [instead,] towards a greater commodity opportunity that he thinks offers the same kind of values that gold and silver did a decade ago. Words: 909
Question: What asset has appreciated more than any asset since the year 2000? Answer: Farmland – by 1,200%! [George Soros and Jim Rogers have recognized that fact and invested accordingly. Here is what you need to know to do likewise.] Words: 974
The Federal Reserve has guaranteed super-low interest rates for two more years – an unprecedented step to arrest the alarming decline of the stock market and the economy – and I believe the following seven agricultural stocks have been unjustly oversold and have significant upside potential. Words: 665
If you think the dollar will decline further then it makes sense to buy commodity stocks and even if there is a global recovery that’s faster than we expect many commodity stocks will still outperform because supply is simply unable to meet the increasing demand for some of the commodities. [Let me tell you] which one(s) to buy[- and why]? Words: 1475