Agriculture ETFs trend on Russia-Ukraine war

Agribusiness ETFs have been trending as investors scrambled to benefit from rising prices of agricultural commodities after the Russia-Ukraine war disrupted the supplies from two of the world's largest grain exporters.

According to Food & Agricultural Data (FAOTSTAT), Russia and Ukraine account for nearly a third of wheat and barley exports, and about a fifth of the corn trade. Aggravated unrest in the region could add more pressure on the supply of agricultural goods, which have been already affected by last year's extreme weather events and the lingering global logistical hurdles.

Since the war erupted, roughly $220 million of net inflows were injected into these ETFs domiciled in Europe and America, bringing the total AUM to $2.17 billion — the highest it has ever been since mid-2014.  Agribusiness ETFs invest in Agriculture-related equities, an alternative to commodity ETCs, which invest in physical commodities or commodity futures.

American Investors: How to invest in Agriculture ETFs

Investors in North America can gain exposure to Agribusiness equities through iShares Global Agriculture Index ETF (COW), VanEck Vectors Agribusiness ETF (VEFA/MOO), iShares MSCI Global Agriculture Producers ETF (VEGI), and First Trust Indxx Global Agriculture ETF (FTAG).

VanEck Vectors Agribusiness ETF is the largest in that space with $1.29 billion in assets under management. The fund received roughly $100 million of net inflows since Russia invaded Ukraine on February 24th. MOO seeks to track the MVIS Global Agribusiness Index and invests in companies across the agribusiness industry from seeds and fertilizers to farming equipment and food processors. In terms of country exposure (as of February 28th, 2022), the United States has the highest share (58.6%), followed by Germany (8.62%), Canada (7.08%), China (4.24%), and Japan (3.89%). As for sector allocation, consumer staples has an exposure of 28.7%, materials 28%, healthcare 22%, and industrials 17.3%.  The fund's 55 holdings include Deere & Co (7.78%), Bayer AG (7.62%), Nutrien LTD. (7.08%), Zoetis Inc. (6.54%), Corteva Inc. (5.78%), Archer-Daniels-Midland Co. (5.49%), IDEXX Laboratories (5.45%), Tyson Foods Inc. (4.49%), Tractor Supply Co. (3.76%), and Kubota Corp. (2.9%).

MOO has a total expense ratio of 0.55% and trades primarily on the NYSE Arca. The fund's share price rose by around 5% since the war broke out.

European Investors: How to invest in Agriculture ETFs

European investors have been bullish on the iShares Agribusiness UCITS ETF (SPAG), adding close to $200 million into the fund this year. SPAG seeks to track the S&P Commodity Producers Agribusiness and invests in diversified agricultural business companies. As of March 8th, 2022, the United States has the highest allocation (56.36%). Canada (11.7%), Japan (7.06%) and Norway (5.79%) come next. Meanwhile, the consumer staples sector (42.93%) has the highest exposure, followed by materials (38.41%), and industrials (18.32%). The fund's top leading names include Nutrien Ltd. (11.25%), Archer Daniels Midland (9.65%), Deere (9.25%), Corteva Inc. (7.57%), and Tyson Foods Inc. Class A.

The fund has a total expense ratio of 0.55% and trades on multiple European exchanges such as the London stock exchange (SPAG, GBP or ISAG, USD), the Euronext Amsterdam (ISAE, EUR), and the Berne Stock Exchange (ISAG, CHF). Since February 24th, ISAG's share price gained 5%.

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