Investment Trends In Agricultural Commodities

Health care and technology are seeing growth and investors are looking to cut on risks that are associated with traditional sectors that may experience a pull back. Agriculture commodity is seeing a fall recently especially during 2015 with factors like bleak economic scenario in China, the high dollar and excess supplies due to innovative agricultural practices. The past has it that commodity prices have been in the green most of the time so adding a non-correlated asset is a wise decision. The reason to add commodities to your portfolio is to straighten the volatility in the stock market.

In the United States, everyone is aware of the oil scenario; it was all over the place. There is no denying the fact that grains are important to Americans. The fall over the past few years cannot be discarded. Soybeans were down by 13%, corn by 8% and wheat by 19% over the last year. The report from the USDA World Agricultural Supply and Demand Estimate (WASDE) has it this has added to the already slow agriculture sector. Though, the report showed a record harvest the prices of soybeans, wheat and corn plummeted in August.

Traders have to understand the pulse of the market before making an investment in commodities. It is important to master the art of investing and selling contracts. It should be practiced with one or more agricultural products. PowerShares DB Agriculture is the most popular ETF where investors can buy stakes in agricultural commodities. You can trade this under symbol DBA. It can help track popular commodity index. It may be noted that DBA has plummeted 13.8% seeing a slide. The shares have slid over 33% over the past 4 years. Remember that with the burgeoning population food is the most basic commodity and there is always a possibility of recovery sooner or later.

The commodity prices are difficult to predict. When the weather is good, there is excess supply and when it is the contrary the yield is mediocre. In the former there will be excess supply and in the latter case, the price will be high. It is predicted that 2015 will have a reduced yield due to wet summer and limited plantation. It can be a problem for local farmers with grain prices on the rise giving commodity traders an opportunity to make some quick money. When grain cost is the low, the investors can turn to livestock.

Also Read A Look at Asia Commodity Exchanges

Leave a Reply