Agriculture Stocks and Commodities

This is an infrastructure posting that looks at Agriculture stocks and ETFs that track various agricultural commodities. “Softs” is the term used for non-food ag commodities, such as cotton. Fuel is a major “input” to agriculture and natural gas is a major input to making synthetic fertilizers; so it’s good to keep an eye on oil and natural gas costs when investing in agriculture.

Some of these tickers will be ETNs, Exchange Traded Notes. They may use more exotic instruments like options, futures, or even swaps. These are often wasting assets, so the fund may have a tendency to shrink or evaporate over time. These are best used only for short term trades, not as long term investments. Some of them hold a small leveraged position in notes, and put the rest in Treasuries, with the intent that this will produce enough yield to offset the shrinkage. That strategy does not always work as well as desired. So if you are thinking of using an ETN, please look at a longer term ( 3 to 5 year or so ) chart to see if there is a long term wastage issue.

Agriculture & “Softs” Commodities.

There are many funds that trade commodities. Ag commodities are notorious for volatile movements and rapid changes of direction. Weather anywhere in the world, changes of food trends and fads, government rulings and bans; all of these can make dramatic shifts in markets. Add in financial instabilities that can cause wide swings too, and it can be a wild place to be.

For example, cotton BAL may be bounced around by fashion trends, cold weather, drought, government subsidy programs, or just a government banning the export of cotton to support domestic manufacturing. As Egypt is a major cotton growing country, political issues there can cut supplies. On large price spikes in one year, the “fashion” the next may “suddenly” be wool or polyester… leading to a drop of cotton demand and a surge in wool prices.

It is generally good to keep total commodity positions less than 10% of a portfolio unless you are an experienced trader. Commodities positions must be watched closely and not left to their own devices for weeks on end.

Still, they can give a clue about other industries as well. If corn prices are ‘way high’, expect beef producers to make less profit. If wheat is way high, expect bread makers to have problems, but if low, expect them to make extra profits. When commodities are doing well, the sellers of farm equipment are very likely to have increased sales. So even if you are not going to buy the commodities, they can give you insight into other trades (or even just how honest your government has been about inflation tendencies…)

Ag Commodities 1 year chart

Ag Commodities 6 month chart

DBA  -  Agricultural commodity futures basket ETN
JO   -  Coffee ETN
FUE  -  Biofuels  ETN
WOOD -  iShares Timber and lumber ETF
COW  -  Livestock ETN
JJG  -  Grains ETN
BAL  -  Cotton ETN
FUD  -  Food ag and livestock ETN
SGG  -  Sugar ETN
NIB  -  Cocoa ETN

CUT us a wood ETF similar to WOOD, but with slightly higher volume. Tends to indicate housing starts / building activity. PCL Plum Creek Timber is a REIT Real Estate Investment Trust and one of the holdings inside WOOD. PCL has a large tree farm operation, so if WOOD is headed up, it is likely that PCL is headed up too. Trees continue to grow and add value to the company even if sales are not happening at the moment.

Other duration charts, and some other tickers, can be seen here by clicking on the link of interest. Multi-year charts with weekly tick marks let you see the broad context of markets over many growing and fashion seasons. Short duration charts let you trade faster time scales.

3 years, weekly,
1 year,
6 months,
10 day

Closeup On Sugar and Brazil

This chart has Bollinger Bands on it. Those two thin red lines each side of the prices. This makes for a cluttered chart, but I noticed that CZZ often tends to bounce between the Bollinger bands. This also makes the moving averages harder to use, so as long as that pattern holds, it looks like using BBands will work better than position vs the SMA stack. Worth watching to see if that is a pattern on the part of the market maker in this stock. CZZ has sugar cane land in Brazil about the size of the old West Germany. They also make ethanol for fuel.

CZZ Cosan - Brazilian Sugar vs BZF Real,  EWZ Brazil and SPY S&P 500,
CZZ  -  Cosan Sugar farm in Brazil
SPY  -  S&P 500 stock benchmark
EWZ  -  Brazil ETF (broad basket of Brazil)
BZF  -  Brazilian 'Real' Currency ETF
SGG  -  Sugar ETN

The Ag and Ag Related Stocks

On this chart, the clear winners are the retail farm goods store of Tractor Supply and Terra Nitrogen.

A selection of Farm Related stocks and funds

A selection of Farm Related stocks and funds

TNH has a large dividend of 9.4% at this time.

I find this 10 year chart rather fascinating. You can clearly see the great speculative “Scarcity Bubble” in fertilizer names some years back, then the severe crash they went through.

10 year, weekly

1 year,
6 months,
10 day

MOO  -  Ag input fund (holds MOS, MON, POT etc.) ETF
DE   -  John Deere - Equipment
SPY  -  S&P 500 stock benchmark
AGU  -  Agrium - fertilizers
MON  -  Monsanto - seed producer including GMO
TNH  -  Terra Nitrogen - high dividend synthetic fertilizer limited partnership
TSCO -  Tractor Supply Company
POT  -  Potash - fertilizer
IPI  -  Intrepid Potash - fertilizer
MOS  -  Mosaic - fertilizers

Some synthetic chemical fertilizer companies, speculative and smaller, vs TNH

TNH - Terra Nitrogen

TNH - Terra Nitrogen

TNH  -  Terra Nitrogen - high dividend synthetic fertilizer limited partnership
RTK  -  Renteck - Synthetic fuels and chemicals company.  Parent of RNF
RNF  -  Renteck Nitrogen Partners - Nitrogen fertilizer LP
CAGC -  China Agritech

Subscribe to feed


About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
This entry was posted in Stock Charts and tagged , , , . Bookmark the permalink.