Soybeans: A Buying Opportunity in the Works?

December 28, 2010


Taking the Technical View

After flat lining for all of 2009 and trading within a narrow trading range, soybean futures broke out in September; the rally has continued through the end of 2010. But with futures sitting at their highest level in over two years, investors must realize that a pullback in the short-term is likely in the coming weeks. Savvy investors will use this weakness as a buying opportunity.

But what to buy? Unlike corn or many softs, a pure-play soybean ETF or ETN is not currently available to investors. However, there are some ETNs that allocate a portion of their portfolio to soybean futures.

The PowerShares DB Agriculture ETF (NYSE: DBA), which invests in 11 different agricultural commodities, puts 12.5 percent of its weight into soybeans. Likewise, the ELEMENTS Linked to the Rogers Agriculture Index ETF (NYSE: RJA) has a 9.6 percent soybean exposure.

But the ETN with the highest exposure to soybeans is the iPath Dow Jones-UBS Grains ETN (NYSE: JJG), with 39 percent in the crop; another 37 percent is allocated to corn, and the final 24 percent to wheat futures.


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