Invesco DB Agriculture Fund ETF as a Fairly Good Play on Desynchronized Soft Commodity Price Spikes

The Invesco DB Agriculture Fund ETF is a well-known ETF which holds agricultural futures contracts, with cocoa (11.11%) and grains (corn 12.5%, soybeans 12.5%, and wheat + Kansas City wheat — 12.5% ​​total) having the biggest gains right now. The DBA fund is currently attractive due to long-term structural changes from climate change and potential inflation. Cocoa prices have soared, and wheat prices have also soared due to the spread of so-called Swollen Shoot disease and overall weather related stress, so supply may be further constrained.

Long-term structural changes caused by climate change, such as changing weather and temperature patterns, water shortages, and governmental policy changes designed to mitigate the growing environmental effects. However, food inflation has clearly staged a comeback in the post-Covid era, and it would be unsurprising to see inflation rising again in the next 24 months. It is back to pre-Covid levels, but the floor may be a little higher.

Back to the Fund. The fund’s underlying commodities may exhibit various mutually uncorrelating seasonality. Most importantly, because of the infrequent rebalancing and relatively equal base weightings, the ETF composition varies substantially from year to year once it's shortly past another rebalancing period. This time the fund is heavily tilted towards June contracts where Cocoa will have 2x its baseline impact.