It was a pretty hectic year for agricultural commodities as the summer months wreaked havoc on prices. After the United States endured the hottest 12-month span on record and an abysmal drought, a number of these staple commodities experienced big movements in price and trading volume alike. But now that 2012 is nearing its close, we look back at these funds throughout the course of the year to see which funds outperformed the rest [for more agriculture news and analysis subscribe to our free newsletter].
It’s always nice to see a smaller fund outdo its largest competitors, as the iPath Pure Beta Grains ETN (WEET) has just $2.7 million in assets. WEET tracks an index that is comprised of a basket of grains futures in an attempt to mitigate the impact of contango. The strategy has worked beautifully this year, as WEET comes in as the top performer, jumping just over 23% for the year. Note that the fund experienced an enormous rally in June/July and has simply held its levels from there.
DIRT Another Pure Beta Winner
Another in the line of iPath’s Pure Beta products, the iPath Pure Beta Agriculture ETN (DIRT) applies a similar methodology to WEET, but spreads it out to a few more ag contracts beyond the grains. DIRT, which has just $3.2 million in assets, surged by 15.6% on the year, ousting competitors like RJA and DBA with ease. It appears that there might be something to this “Pure Beta” strategy, despite the minimal attention it has received from investors thus far. Perhaps these strong performances will be enough to garner more interest [see also 50 Ways To Invest In Agriculture].
SOYB’s Strategy Wins
It would appear that 2012 is the year of unique strategies, as these three funds have been able to outperform some of the more basic, first generation products. The Teucrium Soybean ETF (SOYB) holds multiple futures contracts on soybeans to alleviate contango . The fund has been criticized for its expense ratio of 100 basis points, but its methodology has clearly been a winner this year, as the fund has jumped more than 13.3%.
What About The Big Guys?
DBA and RJA are without a doubt two of the most popular ag ETFs and even among the most known commodity products. Both of those funds dragged way behind on the year, as DBA (the largest ag product by far) actually lost 1.8%, while RJA gained a respectable 3.4%. Of course, it is worth noting that all of the above ETFs were greatly favored in this year’s drought, so had 2012 weather patterns been normal, this list could look significantly different. Don’t count out DBA and RJA based on this year’s performance; it just means that their diversity was not as able to capture the grains rally. It also means that they will not be as susceptible to a drop that may occur if crop outputs return to normal in 2013.
The sector as a whole will certainly be a good one to watch over the next year, as it has plenty of room to move in either direction.
Disclosure: No positions at time of writing.