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4 Agricultural ETFs to Watch

NEW YORK ( TheStreet) - PowerShares DB Agriculture Fund (DBA), iPath Dow Jones-UBS Agriculture Subindex Total Return ETN (JJA), ELEMENTS Rogers International Commodity Agriculture ETN (RJA), and iPath Dow Jones-UBS Grains Subindex Total Return ETN (JJG) reached 52-week highs Monday on rising commodity prices.

While JJA and RJA are trading at the highest levels since the commodity boom during 2008, DBA and JJG rose to recent highs since the second quarter of 2009. Nonetheless, these ETFs and ETNs continue to offer attractive bargaining opportunities on higher commodity prices.

Over the past three months alone, wheat (USDA No.2 bushel of soft red winter wheat) and corn (USDA No.2 Illinois North Central bushel of yellow corn) for spot delivery zoomed about 61% and 37%, respectively on supply constraints. Currently, corn is lingering around its 52-week high.

American farmers will ship $107.5 billion agricultural products in the fiscal year that ends on Sept. 30, the second-highest recorded amount since the $115.3 billion in 2008, according to Wall Street Journal. The exports are expected to grow further to $113 billion next year.

The export growth is boosted by higher commodity prices, especially wheat, as drought ruined crops in Russia. The government banned wheat exports into next year, thereby boosting U.S. exports. Wheat exports are expected to rise to $8 billion for the fiscal year 2011 from the estimated $6 billion for fiscal 2010.

4 Agriculture ETFs

DBA tracks the Deutsche Bank Liquid Commodity Index-Diversified Agriculture Excess Return with an error of 2.74%. Four commodities -- corn, soybean, sugar, and live cattle -- each accounts for about 12.5% in the ETF, which is rebalanced annually during the first week of November. Expense ratio for DBA is 0.85%, above the 0.75% for JJA, RJA and JJG.

JJA is a sub-index of the Dow Jones-UBS Commodity Index Total Return and reflects the returns that are potentially available through an unleveraged investment in the seven futures contracts for agricultural commodities traded on the U.S. exchanges. The ETN has a 0.78 correlation with the commodity index and a tracking error of 2.89%. JJA is less diversified than DBA as soybean, corn, and wheat accounted for 24.6%, 23.6% and 18.3%, respectively, of the sector weighting, at the end of August. The ETN has returned around 28.3% over the past three months.

RJA is the most diversified of the four ETFs and ETNs with 21 different commodities represented. Wheat, corn, cotton and soyabean account for 17.2%, 13.6%, 12.0%, and 9.6%, respectively, of the sector weights. With more diversification, the upside/ downside potential will be lesser. However higher allocation for wheat and cotton than the allocation in DBA led to a 25.8% return over the past three months. In comparison, DBA returned only 15.5% over the same period.
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DBA $21.28 0.00%
JJA $36.03 0.00%
JJG $32.85 0.00%
RJA $6.49 0.00%
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