Soaring food prices

Performance of the GSCI Agricultural Commodity Index, GKX, July 2007 to July 2012

The chart above shows the performance of the S&P GSCI Agricultural Index ($GKX) since the July 2007 onset of the Credit Crunch. Up some 67%, the right hand side of the chart illustrates a recent sharp increase in commodity prices. Driven largely by intense weather the American midwest has recently experienced, all agricultural commodities are seeing record gains in prices with corn seeing an increase of almost 20% in just one months time.

How to profit from soaring food prices? The chart below presents two ETFs that I’m looking at: Deutsche Bank’s PowerShares (DBA) which owns ten agricultural commodities or Teucrium Agricultural (TAGS), which focuses on four agricultural commodities: sugar, corn, wheat and soybeans. DBA is up almost 11% over the past month, while TAGS has soared some 25%.

Performance of two argicultural commodity ETFS, DBA & TAGS, over the past month

The damage from this heat wave won’t be limited to commodity producers or consumers; insurers are looking at almost $2B in claims from weather derivatives.

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