Exchange Traded Funds that Provide Exposure to Agricultural Commodities - dummies

Exchange Traded Funds that Provide Exposure to Agricultural Commodities

By Amine Bouchentouf

Exchange Traded Funds (ETFs) let the weekend investor access investment products that were once the purview of expert industry insiders and professional commodity traders. ETFs can provide easy access to agricultural commodities exposure in your investment portfolio.

PowerShares DB Agriculture Long Index

Agriculture has traditionally been an extremely difficult commodity subasset class to get exposure to, reserved for investors who owned farms or expert agricultural futures traders on one of the exchanges. However, driven by more investor demand for this asset class, new products are emerging to provide exposure to this unique segment of the market.

The PowerShares Deutsche Bank Agriculture Index (NYSE: DBA) is the first ETF product of its kind to give you this kind of exposure. It tracks the Deutsche Bank Liquid Commodity Index Diversified Agriculture Excess Return Index, opening trading opportunities in commodities such as coffee, sugar, live cattle, corn, soybeans, and cocoa.

iPath DJ-UBS Coffee TR Subindex

This ETF product is relatively unique because it’s based on the Dow Jones–UBS Commodity Index Total Return. It isolates a section of this popular index — in this case, the coffee contract — and seeks to replicate its performance via an ETF vehicle (JO). With about $35 million in assets (2011 figures), it’s still a relatively small product, but it gives you exposure to coffee markets without going through the futures markets.