How Belt-Tightening Impacts Food ETFs

While we are preoccupied by the economy and Wall Street, food prices have been quietly creeping up and we have been forced to change our eating habits in a way that may not bode too well for agriculture-based exchange traded funds (ETFs).

In twelve months, food costs have risen 117% with products such as basic foods like beans up 45% and pork up 27%, writes Matthew Bretherton for Money. True, inflation has slowed, but that’s primarily on the falling oil and gas prices.

We throw away food in the millions of tons, much of it is still safe to eat, but now we are less apt to throw away comestibles. A greater number of people are starting to take up this trend and we are starting to turn back to the kitchen stoves once more instead of buying ready meals.

“Inferior” food substitutes and comfort foods, such as baked beans or white bread, are on the rise as shoppers try to find the best amount of food for a bargain. Products past “best before” dates are also being bought up at dirt cheap prices at that long forgotten corner of the market. It should be worth remembering that these dates are guidelines only, but common sense should also dictate a shopper’s decision.

By sticking to a less opulent food plan, consumers may save money, cut food waste, and maybe eat healthier.

ETFs that provide investors a window into food prices and agriculture include:

• Market Vectors Agribusiness ETF (MOO): a global agriculture market ETF, down 3.3% year-to-date
• PowerShares DB Agriculture Fund (DBA): a futures contracts-based ETF, down 4.7% year-to-date
• iPath Dow Jones AIG-Agriculture (JJA): down 1.7% year-to-date
• E-TRACS UBS Bloomberg CMCI Agriculture (UAG): down 29.5% since April 1 inception
• ELEMENTS Rogers Intl Commodity Agriculture (RJA): down 2.8% year-to-date
• ELEMENTS-Linked to MLCX Grains Index (GRU): down 40.8% since Feb. 15 inception
• PowerShares Dynamic Food and Beverage (PBJ): down 6.1% year-to-date
• E-TRACS UBS Bloomberg CMCI Food (FUD): down 25.2% since April 4 inception

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