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Agricultural ETFs look to cash in on booming sector


An appetite for booming agricultural stocks is spawning new exchange-traded funds with quirky ticker symbols, ranging from COW to MOO.

Claymore Investments Inc. will launch its Claymore Global Agricultural ETF (COW-TSX) tomorrow on the Toronto Stock Exchange.

"It's one of the biggest stories of the 21st century," Som Seif, chief executive officer of Toronto-based Claymore Investments, said in an interview.

The drivers of agricultural products - so-called soft commodities - stems from a rising demand for meat by a growing middle class in countries like China and India, and for crops like corn to make biofuels like ethanol, Mr. Seif said.

"Climate changes are significantly challenging agricultural production," and also contributing to higher commodity prices, he added. "Australia's severe drought has significantly driven wheat prices to record levels."

The Claymore Agricultural ETF will replicate the 30 companies in the newly created MFC Global Agricultural Index, net of expenses. This index includes Canadian companies like Potash Corp., Agrium Inc. and Saskatchewan Wheat Pool Inc.

In the United States, the Market Vectors Agribusiness ETF (MOO-A) also invests in stocks, and tracks the DSXglobal Agribusiness Index (from the Frankfurt exchange).

The PowerShares DB Agriculture Fund (DBA-A) plays the agricultural market by buying futures contracts in the four commodities - soybeans, corn, sugar and wheat.

In Canada, Toronto-based Betapro Management Inc. has also filed a prospectus for a Horizons Betapro Agriculture Bull Plus ETF, and a Bear Plus ETF of the same sector.

These funds, which invest in commodities, provide two times (200 per cent) the daily performance of the index, or the inverse in the case of the bear fund.

© 2007 The Globe and Mail. All rights reserved.

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