Invesco’s DB Agriculture ETF is an all-out play on the current momentum in broad agricultural prices. Unlike VanEck Vectors Agribusiness ETF (MOO) which provides a more diverse set of underlying securities extensively across the entire agricultural business integration, Invesco’s structure is more futures contracts exposed, tracking indices of 10 agricultural commodity futures contracts, which is what we all need at the moment. Invesco’s DB Agriculture ETF tracks the DBIQ Diversified Agriculture Index Excess Return. So, it provides an interesting option for money managers seeking some exposure to future contract risk without perhaps the margin profile or know-how to explicitly go long or short on a given contract.

Rising geopolitical tensions saw commodities prices skyrocket at the start of the year, and recent events – including recorded sharp rise in prices of many agricultural products including bottoming out of wheat and corn on CME, as well as spearheading of soybean futures – which we recently covered in our Commodities section – suggest further upward price pressures to be all but guaranteed. Food price inflation is likely to be a central theme into 2023 and beyond.

Another important concern is accelerating shortages of chemical fertilizers – especially in the Eastern hemisphere, since most of them require substantial amounts of natural gas as an irreplaceable and inseparable element of their production technology. Russia was the main supplier of those amounts in the past, while logistically complicated LNG/LPG remains a challenge, and Qatar LNG cargo deliveries, although becoming an increasingly important factor in this respect, cannot secure the growing unrealized demand.

Climate phenomena have hampered food production as well – be it through severe flooding or sweeping droughts. La Nina, a climatic phenomenon characterized by lower air pressures over the Western Pacific, has often been associated with drier than normal conditions observed along the West coast of tropical South America, and the Gulf Coast of the United States.

Food inflation in select G20 countries shows double-digit postings in most countries, with the poorest often suffering severe inflation. Crippling inflation has spread across the world. Yet the latest food price index update compiled by the UN Food & Agricultural Organization (FAO) posted its 8th monthly decline since its March peak. Thus far, that has not translated into lower inflation for households around the world.