Food ETFs Getting Investors' Love Amid Shortage

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Worries over the growing global food crisis and rising prices have rekindled investors’ interest in ETFs that focus on the food and beverage space. This is especially true as First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report) pulled in about $230 million capital on Apr 22, the highest since its inception in 2016.

iShares MSCI Global Agriculture Producers ETF (VEGI - Free Report) saw a record inflow of $105 million last month and another $93 million in April. Invesco Dynamic Food & Beverage ETF (PBJ - Free Report) has gathered more than $98 million since the end of March, the most since 2014. Invesco DB Agriculture Fund (DBA - Free Report) has seen an $830 million infusion in March and April thus far.

The solid inflow has come, given that prices for everything from wheat to cooking oils have been surging amid Russia’s invasion of Ukraine. Both Russia and Ukraine are important agricultural exporters, together accounting for one-third of the global wheat export market. Ukraine is the world’s largest producer of sunflower oil and the fourth-largest producer of corn.

Global food prices are surging at the fastest pace ever as the war in Ukraine disrupted crop supplies, piling up more inflationary pain on consumers and worsening a global hunger crisis through markets for staple grains and vegetable oils. Notably, world food prices jumped nearly 13% in March to an all-time high, per the UN’s Food and Agriculture Organization (“FAO”).  The surge marks the seventh straight quarterly gain, the longest run since 2008. The FAO’s gauge of global prices has jumped about 75% since mid-2020, eclipsing levels seen in 2008 and 2011 that contributed to global food crises.

Farmers in Ukraine are expected to drastically cut crop plantings and the nation is struggling to export supplies already harvested. Elsewhere in the world, high energy and fertilizers have pushed up food-production costs, which is feeding through to bigger grocery bills or threatening output. Further, Ukraine’s ports, which account for about a quarter of all grain trade, are closed, thereby unsettling trade flows.

First Trust Nasdaq Food & Beverage ETF (FTXG)

First Trust Nasdaq Food & Beverage ETF offers exposure to U.S. companies within the food and beverage industry. It tracks the Nasdaq US Smart Food & Beverage Index, holding 30 securities in its basket, with each accounting for less than 9% share.

First Trust Nasdaq Food & Beverage ETF has AUM of $133.5 million and charges 60 bps in annual fees. It sees an average daily volume of about 58,000 shares and has a Zacks ETF Rank #3 (Hold).

iShares MSCI Global Agriculture Producers ETF (VEGI)

iShares MSCI Global Agriculture Producers ETF provides global exposure to companies that produce fertilizers and agricultural chemicals, farm machinery, packaged foods, and meats by tracking the MSCI ACWI Select Agriculture Producers Investable Market Index. It holds 146 stocks in its basket with a heavy concentration on the top three firms. American firms account for 55.9% of the assets, while Canada, Norway and Japan round off the next three spots.

iShares MSCI Global Agriculture Producers ETF has $306.8 million in AUM and trades in around 143,000 shares in an average daily volume. It charges 39 bps in fees per year from investors.

Invesco Dynamic Food & Beverage ETF (PBJ)

Invesco Dynamic Food & Beverage ETF offers exposure to 31 stocks that are engaged in the manufacture, sale or distribution of food and beverage products, agricultural products and products related to the development of new food technologies by tracking the Dynamic Food & Beverage Intellidex Index.

With AUM of $286.6 million, Invesco Dynamic Food & Beverage ETF charges 63 bps in annual fees from investors and sees a moderate average daily volume of 139,000 shares. PBJ has a Zacks ETF Rank #3 with a Medium risk outlook.

Invesco DB Agriculture Fund (DBA)

Invesco DB Agriculture Fund tracks the DBIQ Diversified Agriculture Index Excess Return, a rules-based index composed of futures contracts on some of the most liquid and widely traded agricultural commodities. It has key holdings in wheat, corn, soybeans, sugar, live cattle, and coffee, with double-digit exposure each.

Invesco DB Agriculture Fund charges 93 bps on an annual basis and trades in a volume of 3.6 million shares a day. It has amassed $2.2 billion in its asset base.

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