ETF-Based Strategies
“Agriculture ETFs are good vehicles for securing diversified investments in this sector, although they may not invest in 100% pure-play agribusinesses,” says Chisani. “They have at least 50% load towards purely agricultural businesses. One example is the VanEck Agribusiness ETF, listed as an MOO, which invests in companies that derive at least 50% of their revenue from agriculture.
Similarly, investors who want diversified exposure, but not through ETFs, can invest in agriculture mutual funds. Fidelity Global Commodity Stock Fund, FGFCX, and North Square Oak Ridge Global Resources and Infrastructure Fund, INNNX, are two examples. Similar to ETFs, they may not offer 100% pure agribusiness exposure, but companies that have them have at least 50% exposure.
Investors can focus downstream by investing in exchange-traded products that track specific agricultural commodities. They may invest in real commodities, such as the Barclays iPath Bloomberg Sugar Subindex Total Return ETN, with the symbol SGG, or the Tucrim Corn Fund, which is listed as CORN. They can also invest in a fund that tracks a basket of commodities like Invesco DB Agriculture Fund, DBA.
“Once you are talking about commodities and future contracts, you are dialing up the risk significantly. I would say investing in a single commodity is almost like investing in a technology stock, in that There is a lot of volatility,” Chisani says. “Unless one has a strong view of whether coffee or sugar should see a near-term bounce in the next year or so, I recommend looking at individual commodities.” Instead, invest in a basket.”
For those with the means to invest in high-minimum, low-liquidity assets with a long investment horizon, investing directly in US farmland may be the most ideal option. But those investors, Chisani says, also need to consider the implications of converting their Canadian dollars into US dollars as they buy land. There are also potential tax and property implications, as the US generally taxes based on where a property or business is located, rather than where the owner or operator is.
