The agriculture sector has long been a popular place for commodity trading. After all, it was with agricultural futures that commodity trading first got its start. Farmers had originally used these contracts to help offset any losses in crop yields.
Now, the agricultural space has blossomed into a market chock full of options for investors, but many are still unaware of the vast opportunities the sector offers.
No matter what kind of investor you are, there is certainly an agricultural/agribusiness option that fits your investment style. Below, we outline 50 ways to invest in agriculture to help investors pick the correct security for their portfolio.
Futures
Futures were the original method for obtaining exposure to commodities. These contracts can be difficult to understand and require a rather complex futures account, so they are not meant for the average investor. For those who fully understand the nuances of these contracts, futures can be one of their most powerful trading tools as they offer exposure that, in some cases, can be found nowhere else in the market. The following futures contracts are offered on various exchanges at the CME Group [see also Dividend Special: Top Companies In Every Major Commodity Sector]:
- Cocoa (CJ): These futures, which are not optionable, are quoted in U.S. dollars and cents per ton. Each contract represents 10 metric tons with exposure reaching out to the end of 2013. Those interested in cocoa should look to West Africa as the biggest price driver since this is where the majority of the world’s cocoa is produced.
- Coffee (KT): These futures, which are not optionable, are traded on the NYMEX and are quoted in U.S. dollars per pound. Each coffee contract represents 37,500 pounds and trading is conducted in March, May, July, September, and December.
- Corn (ZC): These optionable futures are among the most popular agricultural contracts. The contract symbol changes based on which month the future expires, but each contract represents 5,000 bushels, or 127 metric tons. The contracts are priced in cents per bushel.
- Cotton (TT): Another soft commodity, cotton contracts are relatively popular as far as volume is concerned. Contracts are quoted in U.S. dollars per pound with each contract representing 50,000 pounds.
- Lean Hogs (HE): Hogs are another popular contract as they offer both futures and options on contracts. Each quote represents 40,000 pounds, or 18 metric tons, with the pricing unit being cents per pound. These futures are traded on the CME.
- Live Cattle (LE): Similar to lean hogs, these futures appear on the CME. They are also quoted in cents per pound, are optionable, and each contract represents 40,000 pounds, or 18 metric tons.
- Oats (ZO): These CBOT contracts are optionable and are quoted in cents per bushel. Each contract of oats is representative of 5,000 bushels, or 86 metric tons. The futures have contracts that expire in March, May, June, July, September, and December.
- Random Length Lumber (LBS): These contracts are both optionable as well as futures-based and are offered on the CME. Each contract represents 110,000 board feet and the pricing unit is represented by dollars per 1,000 board feet (mbf).
- Rough Rice (ZR): Rice futures are offered on the CBOT and their symbol will fluctuate based on which month you are buying. The futures are quoted in cents per hundredweight and each contract comprises 2,000 hundredweights, or 91 metric tons.
- Soybeans (ZS): These CBOT futures extend exposure all the way out to November of 2015. Each contract is priced in cents per bushel with each future representative of 5,000 bushels, or 136 metric tons.
- Sugar (YO): The final soft commodity, Sugar No. 11 is traded on the NYMEX and offers contracts for March, May, July, and October. Each future represents 112,000 pounds with prices quoted in U.S. dollars per pound.
- Wheat (ZW): Wheat futures are traded on the CBOT and currently extend exposure out through 2014. Each contract, which is optionable, represents 5,000 bushels or 136 metric tons, with prices quoted in cents per bushel.
Stocks
Investing the equity side of the equation isn’t always pure play on agriculture, but it can make for a number of interesting opportunities that other investment vehicles simply don’t offer. Equities that focus on these commodities will most often consist of farming and production companies that can offer a number of advantages over other options. A fair amount of these companies offer strong dividend options and high liquidity for traders of all kinds [see also 12 High-Yielding Commodities For 2012]:
- Monsanto Company (MON): This seed producer is a staple name in the agriculture sector.
- Potash Corporation of Saskatchewan (POT): Potash is a fertilizer company that distributes its products primarily in the United States and Canada.
- Deere & Company (DE): Deere is a well-known name with its production of machinery for the agriculture and forestry sector around the world.
- Mosaic Company (MOS): Based in Minnesota, this company derives its main revenues from producing crop nutrients for the agriculture industry.
- Archer-Daniels-Midland (ADM): ADM will make for a nice global play, as the firm stores, transports, and merchandises agricultural commodities all around the world.
- Agrium Inc. (AGU): Agrium is based in Canada and, similar to Mosaic, it produces soil nutrients as well as other industrial and specialty products.
- CF Industries Holdings (CF): Like many other firms on the list, this company and its subsidiaries manufacture nitrogen and phosphate fertilizer products for agricultural and industrial consumers around the world.
- Bunge Limited (BG): The company has its hands all around the agricultural sector, though its main business comes from the purchase, store, transport, processing, and sale of agricultural commodities.
- Terra Nitrogen Company (TNH): This company, as the name would suggest, primarily deals with the production and sale of nitrogen-based fertilizers.
- Cosan Limited (CZZ): This Brazilian-based firm handles the logistics and sale of agricultural property to areas like Europe, Asia, and the Middle East.
- Scotts Miracle-Gro Company (SMG): This household name is one of the more popular fertilizer producers in the United States.
- Compass Minerals (CMP): This firm engages in the production of inorganic mineral products in North America and the U.K. CMP is divided into two segments: salt and specialty fertilizer, making it an indirect play on the agribusiness sector.
- Intrepid Potash (IPI): This firm produces and markets potash, or potassium chloride, a key ingredient in many fertilizers.
- Fresh Del Monte Produce (FDP): Another indirect play, this company is based in the Cayman Islands and handles the production, transportation, and distribution of fresh fruits and vegetables around the world.
- Raven Industries (RAVN): Raven is something of a jack-of-all-trades as it has operations outside of the agricultural sector, including the construction and military industries.
- Adecoagro S.A. (AGRO): Though this firm is technically headquartered in Luxembourg, it operates in South America. AGRO plants, harvests, and sells agricultural commodities such as corn, wheat, soybeans, cotton and many others. This young stock may be a good growth opportunity for those looking for a long-term play.
- Industrias Bachoco (IBA): Stationed in Celaya, Mexico, IBA operates as a poultry producer, breeding, processing, and marketing chicken.
- Cal-Maine Foods (CALM): This company deals with the packaging and distribution of various kinds of eggs. The stock will represent an indirect play in the agricultural sector.
- The Andersons (ANDE): This company, based in Ohio, dedicates a significant amount of its assets to the agriculture sector including plant nutrients, turf products, grains, and ethanol.
- Dole Food Company (DOLE): Dole is well-known for their wide production and distribution of fresh fruits and vegetables as well as packaged foods.
- Cresud (CRESY): This Argentinian firm does almost all of its business in Latin America, where it engages in the production of various agricultural commodities like wheat, corn, soybeans, and others.
- Tejon Ranch (TRC): This company offers a different approach from some of the other options on the list. TRC engages in the development of real estate for agribusiness activities in the U.S. rather than physically producing a specific commodity.
- Yongye International (YONG): This Chinese-based stock researches, develops, and manufactures fulvic acid liquids and powder nutrients for plants and animals.
ETFs
ETFs have been extremely effective for helping to spread commodities to a number of different investors. While it used to be that only futures traders were able to access this asset class, ETFs have helped the average Joe gain exposure to something like agricultural commodity producers with just one simple fund. When it comes to agriculture, there are ETPs with various investment objectives to give investors exposure to more than just plain-vanilla futures contracts [see also Three Things Wall Street Journal Didn’t Tell You About Commodities].
- Market Vectors-Agribusiness ETF (MOO): This fund provides exposure to publicly-traded companies worldwide that derive at least 50% of their revenues from the business of agriculture.
- DB Agriculture Fund (DBA): This ETF invests in futures contracts on some of the most liquid and widely traded agricultural commodities, making it one of the most popular options for achieving exposure to this sector. Some of DBA’s current holdings include contracts on sugar, cattle, coffee, cocoa, soybean and corn.
- DJ-UBS Grains Total Return Sub-Index ETN (JJG): This ETN is a futures-based product that focuses exclusively on one sector of the agricultural industry, grains. JJG invests in corn, soybeans, and wheat, which are all commodities that often receive minimal weighting in broad-based agricultural or commodity products.
- DJ-UBS Agriculture Sub-Index Total Return ETN (JJA): JJA invests in seven futures contracts on agricultural commodities: corn, soybeans, wheat, sugar, soybean oil, coffee, and cotton.
- DJ-UBS Livestock Total Return Sub-Index ETN (COW): This ETF employs a futures-based strategy to invest in both lean hogs and live cattle.
- Corn Fund (CORN): This fund is a next-generation commodity product that offers exposure to a number of different corn futures contract.
- Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL): BAL invests in front-month cotton futures and as such, should be used as more of a trading instrument rather than a buy-and-hold product.
- Rogers Intl Commodity Agric ETN (RJA): This product represents the value of a basket of 20 agricultural commodity futures contracts including corn, wheat and cotton.
- E-TRACS UBS Bloomberg CMCI Food ETN (FUD): FUD measures a basket of 11 futures contracts from the agricultural and livestock sectors. Investors should note that the fund aims to avoid contango by investing in contracts that mature anywhere from three months to one year.
- Dow Jones-UBS Sugar Sub-Index Total Return ETN (SGG): Another futures-based product, SGG consists of a single futures contract for sugar.
- Dow Jones-UBS Coffee ETN (JO): This cleverly named iPath product simply measures front-month coffee futures.
- Dow Jones-UBS Cocoa Total Return Sub-Index ETN (NIB): Another in the line of iPath’s futures products, NIB tracks cocoa futures.
- Dow Jones-UBS Softs Total Return Sub-Index ETN (JJS): This futures fund maintains exposure to three of the four softs with the following breakdown: sugar (47.85%), cotton (14.78%), and coffee (37.37%) (data as of 05/14/2015).
- MLCX Grains Index TR ETN (GRU): This fund tracks an index that is designed to provide a benchmark for the grains sector and for investment in commodities as an asset class. The fund comprises futures contracts on corn, soybeans, soybean oil, and wheat.
- E-TRACS UBS Bloomberg CMCI Agric ETN (UAG): This ETN represents the collateralized returns from a basket of 10 futures contracts representing the agricultural sector.
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Daniela Pylypczak-Wasylyszyn contributed to this article.
Disclosure: No positions at time of writing.