This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

2 Ag ETFs for Cautious Investors

Stocks in this article: SGG BAL DBA MOO POT DE

NEW YORK ( TheStreet) -- The agricultural industry started off this year on a strong note and continues to generate headlines regularly.

However, increasingly, this corner has become a choppy region of the marketplace. With the divergence in crop prices, the full-steam-ahead mentality that defined much of the opening half of the year has begun to fall by the wayside.

During the weeks and months ahead, agriculture bulls will want to maintain a conservative stance on this industry in order to avoid being taken to the slaughterhouse

Clear evidence of the shaky action taking place in the food industry can be found when looking at the family of "soft" agriculture of commodities, which includes coffee, sugar and cotton.

Since the start of May, sugar prices have been on a tear, powering along a nearly uninterrupted upward path. This dramatic rally has continued into July. Month to date, the futures-tracking iPath Dow Jones UBS Sugar Subindex Total Return ETN (SGG) has ascended nearly 15% to all-time highs.

As sugar prices ascend higher, cotton prices have not fared as well. This crop, whose steep rise during the closing months of 2010 and start of 2011 made it a darling amongst agriculture bulls, has seen a steep decline during the past few months. Since the start of April, the iPath Dow Jones UBS Cotton Subindex Total Return ETN (BAL) has tumbled as a result, retreating to levels last seen at the end of November 2010.

The action witnessed from sugar and cotton highlights the inherently volatile nature of single-crop commodity ETNs. On a number of occasions I have warned that, while during times of strength these products can be wildly attractive, the pendulum swings dramatically in both directions. Investors caught with heavy exposure to these products when they turn south can suffer gut-wrenching losses.

It is difficult to determine what is next for individual crops and oftentimes, products like SGG and BAL can find themselves jockeying between big gains and major losses on a day-to-day basis. While, with a keen eye and plenty of patience, an agile, risk tolerant trader may be able to harvesting some strength from these products, investors with a weaker stomach for risk will want to look elsewhere for agriculture exposure.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs