Agricultural commodities like corn, soybeans, and wheat are essential to the food supply, thus spawning a giant global commodities market to buy and sell them. However, individual agricultural commodities are subject to dramatic volatility related to factors including weather, season, population, and more. Investors looking for exposure to agricultural commodities may prefer, instead, to own an agriculture-focused exchange-traded fund (ETF). These ETFs provide diversification by investing in futures contracts of a range of different commodities, or by diversifying the maturity of the futures contracts held for a single commodity.

Key Takeaways

  • Agricultural commodities underperformed the broader market over the past year.
  • The ETFs with the best 1-year trailing total return are SOYB, WEAT, and FAAR.
  • The top holdings of these ETFs are futures contracts for soybeans, wheat, and gold, respectively.

There are 5 distinct agricultural commodity ETFs that trade in the U.S., excluding funds with less than $50 million in assets under management (AUM). Agricultural commodities, as measured by the S&P GSCI Agriculture Index, have underperformed the broader market with a total return of 8.6% over the past 12 months compared to the S&P 500's total return of 18.1%, as of November 13, 2020. The best-performing agricultural commodity ETF, based on performance over the past year, is the Teucrium Soybean ETF (SOYB). We examine the best agricultural commodity ETFs below. All numbers below are as of November 16, 2020.

Teucrium Soybean (SOYB)

  • Performance over 1-Year: 13.3%
  • Expense Ratio: 1.15%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 255,832
  • Assets Under Management: $97.9 million
  • Inception Date: September 19, 2011
  • Issuer: Teucrium

SOYB is structured as a commodity pool, an investment vehicle that pools investor assets to invest in futures contracts. The ETF provides exposure to a single agricultural commodity, soybeans. Soybeans have a number of uses, including as feed, oils, wood substitutes, foam, ink, and crayons. Because of SOYB's narrow focus on a single commodity, the fund may be attractive to investors looking to make a short-term tactical play on one segment of the agricultural commodities market, rather than as part of a long-term buy-and-hold strategy. The holdings of SOYB are exclusively comprised of soybean futures.

Teucrium Wheat (WEAT)

  • Performance over 1-Year: 8.9%
  • Expense Ratio: 1.00%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 372,535
  • Assets Under Management: $71.1 million
  • Inception Date: September 19, 2011
  • Issuer: Teucrium

WEAT was the first pure-play wheat Exchange Traded Product (ETP) on the market when it was introduced 9 years ago. An ETP is a type of security that tracks an underlying security, index, or instrument and which is traded on an exchange like a stock. WEAT also is structured as a commodity pool, combining investor assets in order to invest in wheat futures contracts. Wheat has a variety of uses, including as food, animal feed, fuel, starch, paper, particleboard, and plastic. The ETF is not intended to provide exposure to wheat spot prices. Similar to SOYB, WEAT is best used for gaining tactical short-term exposure to a specific segment of the commodity market due to its singular focus on wheat. Its holdings consist exclusively of wheat futures contracts that are spread across multiple maturities.

First Trust Alternative Absolute Return Strategy Fund (FAAR)

  • Performance over 1-Year: 2.7%
  • Expense Ratio: 0.95%
  • Annual Dividend Yield: 1.02%
  • 3-Month Average Daily Volume: 15,779
  • Assets Under Management: $51.8 million
  • Inception Date: May 18, 2016
  • Issuer: First Trust

FAAR seeks to provide investors with long-term total returns regardless of the current market environment. The fund is actively managed using a long/short commodities strategy. Unlike the other two funds above, FAAR diversifies its holdings across the entire commodity market. Its highest concentration is on agricultural commodities, followed by industrial metals, and then precious metals. The ETF also has relatively small exposures to livestock and energy commodities. It holds both long and short positions, but currently has an overall net long exposure. FAAR's top three long exposures include futures contracts for gold, soybeans, and copper. 

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