Downward price pressure continues to mount on agricultural commodities in the short term, but the long-term analysis could portend to growth.
Agricultural commodities like corn and soybeans continue to skew toward the downside. Traders looking for an area of value may want to avoid the proverbial “falling knife.”
“Current levels of futures contracts suggest that appropriate budgeting prices for 2024 crops production are $4.00 per bushel for corn and $10.50 per bushel for soybeans,” a Successful Farming report noted.
“Those prices would result in low returns in 2024, far lower than the last low-price period from 2014 to 2019,” the report added. “Much higher costs cause lower 2024 returns. Those budget price forecasts could change with unforeseen events, as does occur in agriculture. Over the next several months, estimates for returns and incomes will solidify. Still, it seems prudent to plan for much lower prices.”
Given this, it’s an ideal time to add commodities at current prices and simply continue buying the dips. Of course, that will take an iron stomach and an investor with an eye for the long-term horizon.
Ag Commodities to Grow 3.2% in Next Decade
As mentioned, short-term price pressure could give way to long-term strength. Per an Agricultural Commodity Market report by Allied Market Research, the agricultural commodities market could reach $2206.2 billion by 2032, which constitutes a compound annual growth rate of 3.2%.
As noted, regarding a slump in prices for corn and soybeans, focusing on specific commodities exposure can lead to concentration risk. There’s an alternative by getting more broad-based exposure with funds like the Teucrium Agricultural Fund (TAGS ). The fund offers easy ingress to agricultural commodities that can suit both the long- and short-term investor. Given the long-term growth rate projected by Allied Market Research, playing the long game is ideal.
Furthermore, long-term investors can diversify their portfolios using assets uncorrelated with the broader market. In this case, TAGS offers a perfect complement to a traditional 60/40 stock/bond portfolio in dynamic ETF.
TAGS uses a fund of funds structure that incorporates the following Teucrium funds:
- Teucrium Corn Fund (CORN )
- Teucrium Wheat Fund (WEAT )
- Teucrium Soybean Fund (SOYB )
- Teucrium Sugar Fund (CANE )
In a current market environment where cost is paramount, TAGS is a compelling option given its low 0.13% expense ratio.
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.
For more news, information, and analysis, visit the Commodities Channel.
