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 diversify by holding several commodities, or by diversifying their positions within a commodity, to mitigate the risk. Agricultural commodities as represented by the S&P GSCI Agriculture Index have dramatically underperformed the broader market in the past year. The Index has provided 1-year trailing total returns of 4.0% as compared with 22.4% for the S&P 500.

Key Takeaways

  • Agricultural commodities as a group have significantly underperformed the broader stock market in the past year.
  • The ETFs with the best 1-year trailing total returns are WEAT, RJA, and SOYB.
  • The top holdings of these three ETFs are futures contracts for wheat, wheat, and soybeans, respectively.

There are 5 agricultural commodities ETFs excluding inverse and leveraged funds, as well as those with under $50 million in assets under management (AUM). Note that these ETFs are focused on agricultural commodities, not on agriculture stocks. The best agricultural commodities ETF for Q4 2020 is Teucrium Wheat (WEAT). Below, we look at the top 3 agricultural commodities ETFs as measured by 1-year trailing total returns. All data is as of September 1, 2020.

Teucrium Wheat (WEAT)

  • 1-Year Trailing Total Return: 11.3%
  • Expense Ratio: 1.00%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 184,168
  • Assets Under Management: $61.0 million
  • Inception Date: September 19, 2011
  • Issuer: Teucrium

WEAT was first pure-play wheat Exchange Traded Play (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 index like a stock. It is structured as a commodity pool, an investment vehicle that pools investor assets to invest in futures contracts. WEAT is not intended to provide exposure to spot wheat prices because the underlying index is made up of wheat futures contracts. WEAT holds wheat futures contracts across multiple maturities. The sole holding of this fund is wheat futures.

RICI-Agriculture ETN (RJA)

  • 1-Year Trailing Total Return: 8.0%
  • Expense Ratio: 0.75%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 59,898
  • Assets Under Management: $57.9 million
  • Inception Date: October 17, 2007
  • Issuer: Swedish Export Credit Corporation

RJA is an exchange-traded note (ETN), and as such will expose investors to the credit risk of the issuer while avoiding issues related to tracking error. The fund tracks the Rogers International Commodity Index – Agriculture Total Return, which is a subset of the Rogers International Commodity Index that focuses on 20 agricultural commodity futures. The top holdings of RJA are wheat, corn, and cotton futures.

Teucrium Soybean (SOYB)

  • 1-Year Trailing Total Return: 1.1%
  • Expense Ratio: 1.15%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 248,600
  • Assets Under Management: $80.2 million
  • Inception Date: September 19, 2011
  • Issuer: Teucrium

Like WEAT above, SOYB is a commodity pool offering exposure to soybean futures. Similarly, SOYB is a focused fund targeting a single natural resource, making it an attractive investment as a short-term tactical play on the segment. The sole holding of SOYB is soybean futures.