Wednesday, July 22, 2009

5 Easy Ways to Invest in Sugar...and Other Agricultural Commodities

One of the commonly asked questions on our recent reader survey (appreciate you checking it out here if you haven't already) was:

How can I invest in sugar, and other agricultural commodites, without having to trade futures themselves?

Opening a futures account IS a big pain - and learning also takes time - so many folks want to know how they can get in on Jim Rogers' favorite markets without opening up a futures account.

If that's you, here are some ideas for you to consider. And a heads up that I do intend to cover the basics of getting started with futures at some point...just need some time to put that information together.

Easy ways to invest in agriculture, from the comfort of your regular brokerage account:
  • PowerShares DB Agriculture Fund (DBA) - Consists of roughly equal parts corn, soybeans, wheat, and sugar. Not something I'd buy and hold for 10 years, but something you can trade in/out of fairly safely. I'd consider buying the breakouts, and setting a trailing stop.
  • Jim Rogers Agricultural Index (RICIA) - Despite the fact that this is supposed to track the Rogers Index itself, it scares me a bit, because I've never understood who was behind it. I've also seen RJA mentioned, which may be worth a look, but I can't vouch for it personally. Instead, I would recommend...
  • Direct investment in the Rogers index via Uhlmann Price Securities - The official fund. They do have a minimum investment level, I'm not sure what it is right now. If you want to buy and hold a basket of commodities/agriculture for the next 5-10 years, this is probably the best way to do it, and it's hard to see how you could go wrong.
  • Potash (POT) - Can include many of the other fertilizer guys here as well. Analogy here is that you're buying the guys that make the "picks and shovels" for the coming agriculture boom. Don Coxe likes this method of playing the ag boom. Requires some stock picking, unless you just pick up an index of these guys...which would be...
  • Market Vectors Agribusiness ETF (MOO) - An index of the picks and shovels guys.
  • Livestock Index (COW) - Bonus pick! This one is simple...it's just lean hogs and live cattle futures. The play on agricultures is that cattle and hogs eat grains - a lot of grains - so rising input prices should eventually result in rising meat prices. This is one you probably also want to buy on a breakout, and have a trailing stop.
Were these suggestions helpful? Anything else you'd like to explore in future columns? Leave a comment and let me know!

4 comments:

Davehecksel said...

Thanks for explaining DBA !

Jim also likes metals. RJZ is the way to play that.

Brett Owens said...

Cool thanks Dave!

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