Investors have been cheering China’s latest efforts to shore up its economy with recent stimulus measures. In turn, this could provide a much-needed spark for agricultural commodities.
China has been struggling with the aftereffects of a real estate development crisis the past few years. But more tangible stimulus measures could help increase its demand for ag commodities. In particular, demand for soybeans could increase, as one of China’s top imports are oil seeds.
“This latest move from China has lit a fire under investors, giving them a much-needed jolt of confidence,” said Stephen Innes, managing partner at SPI Asset Management, in a MarketWatch report. “It’s clear that China’s policymakers are throwing everything they’ve got at deflation to jumpstart growth.”
The latest stimulus package is exactly what bullish Chinese investors were hoping for. In turn, this could benefit other markets like commodities. Combined with a rate cut by the U.S. Federal Reserve, this could provide even more tailwinds.
“Chinese policymakers have finally answered the month-long whispers, delivering a fresh batch of monetary easing measures that have the markets humming,” said SPI Asset Management’s Innes. “Coupled with the Fed’s recent jumbo rate cut, it’s adding fuel to the reflationary bonfire, lifting commodities, equities, and pro-cyclical currencies. It’s a rising tide that’s lifting all boats.”
“China stimulus, U.S. rate cuts, and a declining dollar should be bullish for all commodity sectors,” said Roland Morris, commodities strategist for the active Natural Resource Equity Strategy at VanEck. But he also advised to exercise caution amid a potential global downturn.
One Fund for Broad Ag Commodities Exposure
Investors looking for a broad ag commodities play for diversified exposure should consider the Teucrium Agricultural Fund (TAGS ). The fund combines exposure to Teucrium exchange traded funds focused on corn, wheat, soybeans, and sugar. Traders or long-term investors can focus on TAGS for broad-based exposure or the individual funds for a more focused, concentrated approach in specific commodities.
The individual funds featured in TAGS:
- Teucrium Corn Fund (CORN )
- Teucrium Wheat Fund (WEAT )
- Teucrium Soybean Fund (SOYB )
- Teucrium Sugar Fund (CANE )
Getting ag commodities exposure can provide a portfolio with the diversification it needs to help navigate market uncertainty. That said, TAGS is an ideal complement to a traditional 60/40 stock/bond portfolio with uncorrelated assets exposure in the convenience of one dynamic ETF. For more concentrated exposure in specific commodities, investors can also invest in the individual funds mentioned.
For more news, information, and analysis, visit the Commodities Channel.
