4 ETFs for the Agricultural Revival

The domestic economy might be stumbling in some areas, but agriculture is not one of them. Exports have surged enough in recent months to make agriculture exchange traded funds (ETFs) look meaty.

U.S. farmers will export $107.5 billion in agricultural products for the year ending Sept. 30, the second-highest number on record. Grains and meats are leading the rebound, reports William Neuman for The New York Times. In addition, export numbers for next year are expected to total $113 billion.

Export revenue has been aided in a couple of ways:

• Higher prices for many products, such as wheat after a severe drought in Russia, Ukraine and Kazakhstan.
• Asian countries have also increased demand for U.S. farm products, and may surpass Mexico to become the second-largest foreign buyer of U.S. agriculture goods.

Wheat exports for the year are projected to be $6 billion and may increase to $8 billion for 2011 because of higher prices and increased production. Cotton, meat and dairy products have also seen a spike in prices.

Farmers are estimated to see a 6% increase in household income as compared to last year, indicating improvements in the rural economy.

There are a variety of ways to play the agriculture sector. The primary ETF options are funds that hold futures contracts and those that hold the stock of agricultural commodity producers.

• PowerShares DB Agriculture (NYSEArca: DBA): Holds futures contracts on cattle, cocoa, coffee, hogs, soybeans, wheat and more.
• iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): Holds a basket of futures contracts, with 16% of the allocation going to agriculture and another 5% going to livestock.
• PowerShares Global Agriculture (NYSEArca: PAGG): Most of the fund is allocated to agricultural chemicals: 48.8%; agriculture operations account for another 16.1%.
• Market Vectors Global Agribusiness (NYSEArca: MOO): Agricultural chemical companies make up 39.3%; agriproduct operations, 32.6%; agricultural equipment, 15.2%; and livestock operations, 10.1%.

Disclosures: Tom Lydon’s clients own MOO.

Max Chen contributed to this article.