Market Overview

Agribusiness ETFs Fight Summer Malaise

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Agribusiness ETFs Fight Summer Malaise
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Agricultural business stocks have been fighting for survival amid falling commodity prices that threaten to pull them into the abyss. Corn, wheat and soybean prices all hit year-to-date lows this week as crop yields continue to produce an overabundance of supply.

These statistics have made an impact on the Market Vectors Agribusiness (ETF) (NYSE: MOO), which contains 52 stocks engaged in the global agriculture industry. Constituents of this ETF must be primarily engaged in the business of agriculture by deriving at least 50 percent of total revenues from it.

This ETF currently has $1.7 billion in total assets and charges an expense ratio of 0.55 percent annually.

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Top holdings in MOO include well-known names such as Monsanto Co and Archer-Daniels-Midland Co. In addition, only 50 percent of the total holdings in MOO are U.S.-based companies. The other half is spread among a variety of emerging and developed nations, making this a truly global basket of securities.

So far this year, MOO has struggled to remain above the flat line and has recently breached its 200-day moving average for the second time in the last six months.

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While this weakening price action is concerning, a potential turn in commodity prices may be just what these stocks need to regain footing and reestablish a new uptrend.

Other key ETFs in this space include the Global X Fertilizers/Potash ETF (NYSE: SOIL) and iShares MSCI Global Agriculture Producers ETF (NYSE: VEGI). SOIL includes 24 companies that are actively involved in the fertilizer industry, while VEGI has a wider index of 122 global agriculture stocks.

Both alternatives offer a unique index construction methodology that is markedly different than MOO. However, this entire group is suffering from sideways price action since the beginning of the year that has been marked by uncertainty.

The next phase for these ETFs will likely be driven by increased global demand for agriculture production as a result of commodity cycle expansion and growth in emerging or frontier nations.

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