According to agricultural commodities traders, escalating global tensions could further fuel “food wars” as countries look to protect their food supplies and stock up on agricultural commodities in preparation of potential conflicts.
“We have fought many wars over oil. We will fight bigger wars over food and water,” said Sunny Verghese, chief executive of Olam Agri, a Singapore-based agricultural trading house, via a Financial Times report.
Verghese noted that food price inflation was a prime catalyst in governments intervening, as well as more nontariff trade barriers in 2022 when Russia invaded Ukraine in February 2022. This, according to Verghese, caused "an exaggerated demand-supply imbalance.”
Developed countries with larger commodities have been stocking up on food supplies, increasing demand and creating higher prices. Additionally, harsher climate conditions have been affecting supply. And certain commodities like cocoa, coffee, and sugar have been benefiting tremendously.
“Adverse weather conditions, mostly in the Southern Hemisphere, have played an important role in sending several food commodities sharply higher,” said Ole Hansen, head of commodity strategy at Saxo Bank, in a Wall Street Journal report.
A Potential Commodities Play
“Food wars” could potentially provide an impetus for commodities prices. Thusly, an ideal play would be to get broad-based exposure with funds like the Teucrium Agricultural Fund (TAGS ). It offers easy ingress to agricultural commodities that can be beneficial to both the long- and short-term investor.
Longer-term investors can diversify their portfolios with assets that are uncorrelated with the broad market. Thus, TAGS offers a perfect complement to a traditional 60/40 stock/bond portfolio in the convenience of one dynamic ETF. The fund combines exposure to Teucrium funds focused on corn, wheat, soybeans, and sugar.
Alternatively, short-term traders can use the fund to play the volatility of ag commodities prices as opposed to holding multiple positions in a variety of ag commodities. TAGS can essentially encapsulate the ag commodities market via one fund.
“The market volatility created by these big moves creates a ton of opportunity,” he said. “It’s creating a lot of volatility intraday, which is amazing for traders. It’s giving them a lot of opportunities to go in and to produce income that way.”
Furthermore, TAGS presents itself as a compelling option given its low 0.13% expense ratio. That makes it an ideal option for cost-conscious investors in the current macroeconomic environment. The fund is an optimal way for ingress into agricultural investing by combining various Teucrium funds that represent commodities. Furthermore, investors can focus on the fund for broad-based exposure or the individual funds for a more focused, concentrated approach in specific commodities.
The funds featured in TAGS:
For more news, information, and analysis, visit the Commodities Channel.
