Grain ETFs are exchange traded funds that invest in commodities like wheat, soybeans and corn.
As with any natural commodity grain ETF products largely dependent on climate and weather conditions around globe. Prices of grain ETFs usually go up as soon as there is a natural disaster like drought or wildfires (Russia & Asia 2010) when the grain prices rose by 33% or come down if there is oversupply for some particular grain.
Worldwide food production is largely dependant on grain and as the growing worldwide population is getting both larger and wealthier grain ETF investments are seen by many financial investors as a good way to profit from it.
According the United Nations global grain prices were at all time high in December 2010 and they have had a steady climb in 2011 as well.
Some US critics have argued that US ethanol production is largely responsible for the shortages or corn crop around the world and raise in grain ETF prices. However, the issue is more complex that that. As ethanol burns with less waste than gasoline, making it a more green fuel to use, lot of interest groups are advocating ethanol as more environmentally friendly fuel to use. According to USDA more than 30% or US corn was used for ethanol production in 2010, which is substantial as 39% of the worldwide corn is being produced in the States.
Rising grain prices inevitably also raise prices for other foodstuff, due to the climbing feed costs for meat production. Other products that are affected by grain prices are soft drinks and some sweets, because of the corn syrup they use.
Grain ETFs offer you good exposure to corn, wheat and soybeans, if you think the demand for them will go up in the coming years.
Grain ETFs are listed below-
