A Deeper Look At The ETF Options In The Agriculture Space

The April showers in the Northeast U.S. where we are located have us thinking about the summer growing season and the fall harvest in terms of Agricultural ETPs.

We typically cover specific Agricultural ETPs in this piece from time to time if there are volatile price movements in the space if not for seasonality/weather reasons as well. While the Agriculture based ETP space is far from its peak in terms of investment interest and momentum in the funds themselves, the segment is still relevant and certainly investable for those model managers that may wish to incorporate a sleeve of their portfolio to the Agricultural space without having to trade futures or worse, the physicals themselves.

DBA (PowerShares DB Agriculture, Expense Ratio 0.85%) is the largest fund in the space at $714 million in assets under management, and is designed to grant broad exposure to the agricultural segment via all of the chief sub-sectors. In the trailing one-year period, the fund has still managed to net new assets via inflows of about $52 million, in spite of poor performance across the Agriculture segment itself during this time-frame.

In fact, it was just three trading sessions ago where DBA traded at a new 52-week low before experiencing a bit of a relief rally leading it into where it is trading today. Presently the sub-sector breakdown in DBA (via its investment in various agricultural futures) looks like the following: 1) Live Cattle (16.03%), 2) Corn (12.94%), 3) Soybeans (12.68%), 4) Sugar (10.82%), 5) Lean Hogs (9.53), 6) Coffee (8.72%), 7) Cocoa (8.70%), 8) Wheat (6.07), 9) Feeder Cattle (5.26%), and 10) Cotton (3.22%). Of course, these holdings are subject to change over time since the fund re-weights itself on an annual basis on the “6th Index Business Day of each November.”

DBA is a mammoth compared to the next largest fund in the space, as the AUM across other “Agriculture” alternatives here drop off quite sharply after the largest fund in the space. Other relevant “Ag” plays include JJG (iPath Bloomberg Grains Subindex Total Return ETN, Expense Ratio 0.75%, $105 million in AUM), which is the second largest fund in the space and clearly a “Grains” play, as well as RJA (ELEMENTS Rogers International Commodity Index – Agriculture Total Return ETN, Expense Ratio 0.75%, $105 million in AUM), CORN (Teucrium Corn Fund, Expense Ratio 1.00%, $68 million in AUM), and WEAT (Teucrium Wheat Fund, Expense Ratio 1.00%, $60 million in AUM).

There are several other “single Agriculture future” based ETPs on the marketplace as well for those looking to hone in on specific exposure whether it be Cotton or Cocoa (which we profiled recently here) for instance, and we will save coverage on those for a later date.

The PowerShares DB Agriculture Fund (NYSE:DBA) was trading at $19.32 per share on Wednesday afternoon, down $0.08 (-0.41%). Year-to-date, DBA has declined -3.25%, versus a 7.07% rise in the benchmark S&P 500 index during the same period.

DBA currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #61 of 126 ETFs in the Commodity ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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