An ETF for Growing Appetites
Long-term growth in global food consumption should benefit this fund's holdings, but investors should be prepared for a bumpy ride.
VanEck Vectors Agribusiness ETF (MOO) invests in U.S. and international agricultural stocks and weights its holdings by market capitalization. This includes firms that sell agricultural equipment, chemicals, and seeds, such as Monsanto (MON), Potash Corp of Saskatchewan (POT), and Deere (DE). Just less than half the portfolio is invested in foreign stocks, and the fund does not hedge its foreign-currency exposure. Despite its global reach, this is a highly concentrated portfolio. Its top 10 holdings account for more than half of its assets and have a significant impact on performance. This could serve as a suitable satellite holding for investors who want to profit from growth in global food consumption and are willing to accept considerable volatility.
Agriculture commodity prices have a significant impact on the performance of most agriculture businesses because their customers' income and demand for inputs, such as tractors and fertilizer, is tied to grain prices. But the fund's performance has been only moderately correlated with commodity prices during the past five years. That’s because there are other factors, like expenses and product life cycles, that can influence these firms’ profitability. And demand for yield-enhancing products isn’t entirely driven by grain prices. Harvest size can also have an impact.
Alex Bryan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.