Picking The Right ETF For A Soybean Rally
Soybeans are generally not the most exciting topic of conversation. Vegetarians tend to get excited about them; meat eaters tend to wince.
They do, however, get more interesting when they can make you money.
Soybean futures rose 1 percent Monday, according to the Wall Street Journal, as fears mounted that Argentina, the world’s third-largest soybean producer, may not produce as many soybeans as had previously been expected.
Production estimates on the first- and second-largest soybean producers—America and Brazil—have already been cut following droughts. Argentina, unfortunately, has been suffering from the opposite problem: Too much rain has delayed planting.
Soybeans have been volatile lately. The January futures contract, for the most part, dropped steadily in the first two weeks of November (peaking at -9 percent) before rising by about 4.5 percent in the last half of the month.
One-Month Soybeans Futures Performance
If you believe that soybean prices are going to continue moving up, there are three ETFs that offer exposure to the space.
The best choice for pure soybean exposure is the Teucrium Soybean Fund (NYSEArca: SOYB). It offers 100 percent exposure to soybeans using three different futures contracts—currently the March, May and November 2013 contracts.
Unfortunately, it’s expensive—SOYB costs 2.08 percent, making it one of the most expensive commodity ETFs on the market.
Investors have fewer—but better—choices.
Sometimes what’s behind a very high dividend yield is truly surprising.
For VIX-related ETFs to work as that ‘magical’ hedge, you have to time the market. Good luck with that.
But this new product is different than other euro-hedged funds.