Making Money Alert
ETF Talk: Finding Opportunity on the Farm
01/04/2012
Our farming communities remain a vital sector of the U.S. America
This exchange-traded note (ETN) is a sub-index of the Dow Jones-UBS Commodity Index Total Return. The ETN reflects the returns that potentially are available through an unleveraged investment in the futures contracts on physical commodities comprising the Index, plus the rate of interest that could be earned on cash collateral invested in specified Treasury Bills. The Index is composed of seven futures contracts on agricultural commodities that are traded on U.S.
Now is a good time to highlight commodities, since the important USDA Annual Crop Production Report will be released on Jan. 12. That day will be an important one for the corn and wheat markets, in particular, with the release of information in the report about corn stocks and wheat seeding
Many analysts are predicting that a number of trends that took hold in 2011 will continue. As of now, the data suggests record supply and low inflation rates for food prices going into 2012. With record availability for feed, livestock farmers also are expected to increase their supplies of beef and pork in 2012. We potentially could see commodity prices stabilize or even decline in the coming year.
In any case, JJA could be a solid ETN if you have a feel for the commodity markets and believe the current depressed prices could signal a buying opportunity. Finally, keep in mind that ETNs differ from ETFs, particularly in your tax liability. You would want to do a bit of additional research before investing in any particular ETN or ETF to understand what you are buying.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.