High Grain Prices Might Make Thanksgiving A Turkey, But ETFs Hog Returns

Two of the country’s oldest agriculture companies, holdings of a global agriculture exchange traded fund (ETF), are joining forces.

Bunge Ltd. (BG) announced that it’s buying Corn Products International (CPO) for $4.4 billion, the Associated Press reports. The deal has been OK’d by the boards of both companies and is expected to close in the fourth quarter if the shareholders and regulators approve it.

Both companies are components of the Market Vectors Global Agribusiness (MOO): Bunge is 4.6%, while Corn Products is 1.2%. Year-to-date, the fund is up 11.1%.

Commodity prices are higher than ever, and the recent flooding in the Midwest is about to have a major ripple effect. Beef, pork, poultry, eggs, cheese and milk are all about to get more expensive as livestock owners are forced out of business or forced to slaughter more cattle, hogs, turkeys and chickens to cope with the rising cost of corn-based animal feed.

Some experts say the effect could be more apparent later this year, raising the price for everything from Thanksgiving turkeys to Christmas hams, reports Stevenson Jacobs for the Associated Press.

A couple of examples:

• One pork supplier says the cost of feeding a single hog has gone up $30 in one year. Passing that on to consumers would mean another 15 cents per pound.
• U.S. beef producers spend 60%-70% of their production costs on animal feed, and it’s rising daily.

Other agriculture ETFs and exchange traded notes (ETNs) that have benefited from the record prices include:

• E-TRACS UBS Bloomberg CMCI Agriculture Index ETN (UAG), up 11.4% since April 4 inception
• ELEMENTS Rogers International Commodity Agriculture ETN (RJA), up 11% year-to-date
• PowerShares DB Agriculture (DBA), up 21.6% year-to-date

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