Three ETFs to Play Rising Rice Prices
Poor weather conditions around the world may result in a supply shock, pushing rice, grain, and other agricultural-based commodities higher and giving positive price support to these ETFs.
According to the UN Food and Agriculture Organization, Thailand witnessed its worst flooding in more than 50 years resulting in nearly 13 percent of the nation's rice crop being destroyed. This is vital to global supply as that Thailand accounts for more than 30 percent of global rice exports.
Further supply constraints are expected to dwell in South America as the region is witnessing La Nina weather patterns. Low rainfall and dry weather are characteristic of La Nina, which could result in hindered rice and grain production.
Lastly, global production is expected to be curtailed by the weather witnessed in Arkansas. Arkansas, which accounts for more than 40 percent of US output, faced flooding in the beginning of the year and a drought through the summer, allowing the USDA to forecast a 32 percent reduction in crop.
On the demand side, consumption of staple commodities like rice and grains is expected to remain insatiable. The world population continues to grow and rice remains a major player in most diets around the world. In fact, according to a Bloomberg article, consumption of rice has increased every year since 2006, and economic growth in the Group of 10 countries is expected to accelerate at a higher rate in 2012 than 2011, which should translate to a boost in consumption.
In a nutshell, supply shocks around the world are expected to boost rice and grain prices as demand remains steady and grows despite excess supply that could potentially be brought to the global market by India.
Editor's Note: This article was written by Kevin Grewal, founder of etftutor.com.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter