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Here's How El Niño Could Affect Your Portfolio

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October 13, 2015 12:44 pm
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Here's How El Niño Could Affect Your Portfolio

Earlier this year, forecasts for the El Niño weather phenomenon pushed many investors to enter the commodity space on expectations that food prices were going to rise.

For those that did, recent reports from government officials that the weather pattern could be its most severe in almost 20 years have been good news. Farmers are already warning about crop shortages and several agricultural products have seen sharp gains in response.

Food Prices Rising

Las week, the United Nations’ Food and Agriculture Organization reported that global food prices increased for the first time in more than a year, a sign that the agriculture space is already beginning to feel the pinch.

The UN attributed much of the increase to dairy and sugar prices, which have risen 36 percent and 31 percent, respectively.

Related Link: Profit From One Of The Worst El Niños Ever

Time To Invest?

For investors who didn’t get on board at first mention of El Niño, some experts say there is still time.

Commodity prices probably won’t reflect the full impact from the weather for at least a few months, and some forecasters say conditions may continue to plague farmers well into 2016.

Who Will Be Affected?

El Niño is expected to have far-reaching consequences for everyone from Brazilian and Vietnamese coffee producers to Australian and American wheat farmers.

To enter the commodity space and profit from crop shortages, investors are looking to ETFs that track affected commodities. The Teucrium Wheat Fund (NYSE: WEAT) has risen 4.15 percent over the past month, but many see a global wheat shortage on the horizon, which could push prices even higher.

Crop shortages could also have a domino effect on livestock as it will make feed more expensive. For that reason some investors are looking to funds like iPath Bloomberg Livestock Total Return Sub-Index ETN (NYSE: COW) or E-TRACS USB Bloomberg Commodity Index Exchange (NYSE: UBC).

Image Credit: Public Domain


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