Agricommodities are the raw materials for Processed Food and Beverage industry and Feed for Livestock. The Agricommodities ETF ($DBA) has broken out from a base on both price and momentum. Most of its constituents have been rising steadily for a month.
$DBA – Agricommodities ETF
Rise in Demand from China
China has been buying large quantities of soybean and corn over last two months. The falling US Dollar has buoyed the demand for exports.
Soybean Futures have formed a base since their March lows and a pullback to overhead resistance. A break from the ascending triangle forming around 38.2% retracement from December 2019 high may be bullish.
Feeder Cattle Futures: Soybean, Wheat and Corn, along with cotton seed are used in feed for livestock. Increase in their prices also increases the cost of feed which forms a major chunk of livestock production costs. Feeder Cattle Futures have been range bound since 2016. After a failed break down from this range support, the price has broken above the downtrend line from April 2019 high and 38.2% retracement of October 2014 high, supported by momentum.
Ticker Watch
$DBA $MOO $SOYB $ADM $DE $PBJ
$ADM: Archer-Daniels-Midland Company is in the business of procurement, transport and processing of agricommodities, feed product import, export, and distribution; and structured trade finance activities. It has broken out from its downtrend line since its October 2018 high and is currently at the resistance of 61.8% retracement. A break above 43.50 may lead the price to a target of 52.
$DE: Deere & Company is one of the largest manufacturers of agricultural and farm equipment. It is trading near its 52 week high (181.99). I will be watching for price to consolidate and break above this level with a probable target 210.
Rising prices of Grains along with Coffee, Cocoa and Sugar indicate an inflationary trend in food in the coming months.
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