Sal Gilbertie, CEO of Teucrium, told ETF.com the firm is having its “busiest year” in over a decade given the volatility in grains and commodities markets.
According to Gilbertie, high grain prices aren’t going away soon.
While a grain accord was signed last month in Istanbul to ease wheat exports through the Black Sea, Teucrium remains skeptical about the long-term success of this agreement given Russia’s determination to gain control of Eastern Ukraine and its major seaports.
In addition to political uncertainty and concerns over freedom of shipments, rising natural gas costs loom as a factor that may push grain prices higher.
"The price of corn is going up and all agricultural products will stay elevated for a while because of fertilizer prices," he said on ETF.com’s Exchange Traded Fridays Podcast on Aug. 26. “When the price of natural gas doubles, which it has, the price of fertilizer has doubled and tripled in a lot of places. That's your No. 1 cost to growing crops."
Ukraine’s significance to the global crop market is another reason prices may rise in the next few months, Gilbertie said. Before the war, Ukraine was one of the world’s biggest exporters of wheat, corn, barley and sunflower oil.
‘No One Stops Eating That Bagel’
The “price of crops is going to stay elevated as long as the price of natural gas is elevated; who knows how long that'll be,” he said. “And it may get worse this winter as Russia squeezes Europe with their natural gas supply."
"It's worth noting that when you look at grain indexes versus stocks, in nine of the last 10 pullbacks of the S&P 500 of 10% or more, grains outperformed very significantly,” he said. “So if you want to balance out your portfolio, and you're looking for a way to stabilize your portfolio, exposure to grain is really important."
One of the key factors that makes exposure desirable for investors, according to Gilbertie, is the stable global demand we’ve seen.
"It doesn't matter what iPhone people are using or what the politics are in any particular country, no one stops eating that bagel,” he said. “And that helps stabilize your portfolio by adding grains in there."
Contact Daria Solovieva at [email protected]