Since Ukraine and Russia are major exporters of wheat and grain, the war between the two countries has fostered a surge in the prices of these food commodities. The disruption of fertilizer supplies due to the war has also contributed to the rising food prices. The Food and Agriculture Organization (FOA) has noted that its FAO Food Price Index, which tracks monthly changes in the international prices of a "basket of commonly-traded food commodities," averaged 159.3 points in March, up 12.6% from February, the highest level since the organization began tracking the changes in 1990.
Because of the rising prices of food, fertilizers, gasoline, and other commodities, inflation hit a four-decade high, rising by 8.5% annually in March. Furthermore, Ukraine has limited exports of sunflower oil, wheat, oats, and cattle to protect its economy from the effects of the war. According to Bank of America, food price inflation is expected to continue its historic surge throughout this year, with the Russia-Ukraine war hitting American grocery stores.
So, we think investors looking to capitalize on the surging food prices could consider investing in quality ETFs, First Trust Nasdaq Food & Beverage ETF (FTXG) and Invesco Dynamic Food & Beverage ETF (PBJ), which benefit from rising food prices.
First Trust Nasdaq Food & Beverage ETF (FTXG)
FTXG is a liquidity-selected fund of 30 U.S. food and beverage companies. These companies comprise brewers, distillers and vintners, manufacturers, distributors, packagers of food and beverage products, and companies that grow crops or raise livestock, operate fisheries, or own non-tobacco plantations.
The fund has approximately $828.4 million in assets under management (AUM). Archer-Daniels-Midland Company (ADM) is FTXG’s top holding with an 8.75% weighting, followed by Bunge Limited (BG) and Tyson Foods, Inc. Class A (TSN), with 8.30% and 7.71% weightings, respectively.
FTXG has a 0.60% expense ratio versus the 0.38% category average. The fund has gained 5.8% in price year-to-date and 9.9% over the past nine months. Over the past month, the ETF's net fund flows were $374.1 million.
Closing the last trading session at $27.37, the ETF is currently trading below its 52-week high of $29.66. FTXG's NAV stands at $27.60. The fund has a five-year monthly beta of 0.74, which indicates less volatility than the broader market.
FTXG's POWR Ratings reflect this promising outlook. The ETF has an overall B rating, which equates to Buy in our proprietary rating system.
FTXG has an A grade for Trade and a B grade for Peer and Buy & Hold. Among the 48 ETFs in the B-rated Consumer-Focused ETFs group, FTXG is ranked #11. Click here to get all the FTXG ratings.
Invesco Dynamic Food & Beverage ETF (PBJ)
PBJ provides targeted exposure to the consumer sector, including a mix of both discretionary and staples. PBJ is linked to an index, which is part of a suite of Intellidex products that utilize quantitative analysis and stock screening to identify holdings.
PBJ has approximately $309.5 million in AUM. The ETF has an expense ratio of 0.63%, versus the 0.38% category average. The fund's major holdings include ADM with a 5.53% weighting, Constellation Brands, Inc. Class A (STZ), and Hershey Company (HSY) with 5.37% and 5.28% weightings, respectively..
The ETF has gained 2.8% year-to-date and 12.7% over the past nine months. Over the past month, the ETF's net fund flows were $117.19 million.
Closing the last trading session at 46.36, the ETF is currently trading below its 52-week high of $49.46. Its NAV stands at $46.66. The fund has a five-year monthly beta of 0.68, which indicates less volatility than the broader market.
It is no surprise that PBJ has an overall A rating, which translates to Strong Buy in our POWR Ratings system. It also has an A for Trade grade and Buy & Hold grade, and a B for Peer grade. In addition, it is currently ranked #8 in the same group. Click here to get all the PBJ ratings.
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FTXG shares were trading at $27.36 per share on Tuesday morning, down $0.01 (-0.04%). Year-to-date, FTXG has gained 6.06%, versus a -12.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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