Investors across the world are moving with great speed towards investing their hard earnings in trading Exchange Trade Funds (ETF). Cost efficiency, low risk and transparency makes them a good choice for traders. ETFs in various sectors are booming in various stock markets of the world. Investment in the Food related ETFs are witnessed at large number. The attraction will drag more investment in the near future as the economic giants in the Food sector are changing their trade policies accordingly to minimize further risk of downturn. To some it is the reason that trade in Food ETFs relatively showed boom in the U.S and in Europe.
Food related ETFs can reap benefits as the prices of grains, dairy, meat and cooking oil are elevating in emerging markets. According to Deutsche Bank, snacks and confection have long-term potential and traders will focus on them for better returns like Cadbury was focused by many investors. As the demand of the food production and consumption is growing, the ETF market has good enough chance to take advantage of the situation.
Global X Food ETF (EATX) is circling around a product which offers exposure to the global food and beverage industry as the ETFs are launched and announced by the Global X. The EATX tracks the Solative Global Food Index, which is a benchmark consisting of nearly 50 companies engaged in listing agriproducts or livestock operations, food products and food technologies. The stock is to be found in seventeen different companies with almost 48% allocation in the US followed by China and Switzerland.
Some top companies include Nestle, Danone, General Mills and Kraft. Nestle has recently announced 40% raise in the sale, which indicates that the EATX has great potential of generating revenue in the emerging markets. There are signs that the new ETF will charge an expense ratio of approximately 0.70%.
The Dynamic Food and Beverage Portfolio (PBJ), consist of more than 29 food companies; all from U.S thus making it domestic equity fund. Whereas, the EATX is comprise on international companies.
Other Food ETFs focusing on the agriculture commodities include the PowerShares DB Agriculture Fund (DBA), Market Vectors Agribusiness ETF (MOO), iPath DJ-UBS Agriculture TR Sub-Idx ETN (JJA), and UBS E-TRACS CMCI Food TR ETN (FUD).
DBA ETF is composed of future contracts in the agriculture sector mainly focusing attention on cattle, soybeans, sugar, corn, coffee, wheat and cotton. Whereas the FUD is an ETN looking to collateralize profits from the agriculture and livestock sectors. The MOO ETF is a cluster of natural resource companies including holdings of Potash Corporation, Deere & Company and Monsanto Company.
The JJA is also an ETN seeking the performance of futures contracts on physical commodities. It has allocated 26% weightings to corn, 24% to soybeans, 15% to wheat and nearly 9% to soybean oil.
The raise in the world food index day by day although, shows that Food ETFs involve low risk and less paper work before trading, but it is recommended that one should not overlook the risks, no matter how small they are. Proper homework before investment in the food sector will lead towards low risk.
