Food for Thought: Considering Wheat and Fertilizer Investments

The years since the emergence of the COVID-19 pandemic have been a rollercoaster for markets, but there are some markets that have performed relatively predictably throughout it all. Grain and fertilizer assets, in particular, seemed unmoving in the early days of the pandemic, but then began a marked rise over the last few years that continues to this day. It may seem counterintuitive to buy in now, with prices at all-time highs, but there’s little indication that they’ll trend downwards anytime in the near future. Now might just be the perfect time to get into the market before the spring planting season gets fully underway in the northern hemisphere.

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High grain prices aren’t just due to war in Eastern Europe

The attempted blitzkrieg by Russia that stalled out as it attempted to seize Ukraine drove an immediate spike in agricultural products, especially wheat and fertilizers. The two nations export almost a third of the world’s wheat supply. The ongoing conflict left harvested winter crops on docks with no clear method of export, and the spring planting season in question.

But global supply chain worries, the steadily increasing cost of fertilizer, and labor shortages due to coronavirus drove wheat futures up even before troop movements became apparent in Russia. The price of grains has continually grown over the past few years, with wheat surging by over 50% in the last 12 months, eclipsing the decade-high price set just last year. As nations work to increase their spring planting and secure food supplies for the coming year, the need for fertilizer is likely to continue its accelerated growth on both the domestic and international stage.

You don’t need a barn or tractor to reap the benefits

Where there’s profit, there’s a market, and wheat is no exception. One of the easiest ways to invest in wheat is to pick up shares of the Teucrium Wheat Fund ETF (WEAT 1.06%). This exchange-traded fund pegs its pricing to Chicago Board of Trade wheat futures, trading closely in value with contracts for future delivery produced by that market. 

The ETF boasts a moderate expense ratio of 1.14% and hedges against contango (spot prices in the future being lower than the price of the futures contract) by holding contracts with multiple expiration dates. These include one-month rolling, two-month, and year-end (December) contracts. The Teucrium Wheat Fund has outperformed many other commodities’ ETF options, including those that include both soybeans and corn alongside wheat. It’s up approximately 43% year to date, while Barclays Bank PLC (JJG -2.71%) delivered roughly 31% year-to-date gains, and  Elements MLCX Grains Index (GRU -1.89%) is up around 34%. Since its second most recent all-time-high in 2017, the Teucrium Wheat Fund has delivered five-year returns of 32.1% overall.