MOO is a 'pick and shovels' agribusiness ETF specializing in suppliers, not commodity prices, and has retreated alongside food prices.
Yet the risk of potential crop disruption remains high from widespread droughts in Europe and China, to a failure of the Ukraine Black Sea deal.
Climate change is moving optimal growing conditions to new regions but investment will be required to realize those opportunities.
MOO is a buy due to ongoing investment and demand in agribusiness.
In a disruptive era, MOO is an opportunity and a hedge.
The VanEck Vectors Agribusiness ETF (NYSEARCA:MOO) is an equity ETF that holds companies that sell to farmers. This includes providers of fertilizer, seeds, irrigation equipment, farm machinery, animal health services, etc.
We believe MOO is an opportunity because we see a solid chance of one or more of the following disruptions lifting food prices and MOO;
Ukraine Black Sea exports are disrupted again.
Weather impact from a third La Nina hurting harvests now and in 2023.
Climate change continues, forcing farmers to invest in operations for resiliency and new types of crops as weather changes.
The first two would cause a spike in food prices. The likelihood is a coin flip and highly likely, respectively. The third is also highly likely but represents a medium-long term trend supporting demand for agriculture investment.
But first, let's look at recent movements before we discuss each of the three points listed above in turn.
Food prices and MOO are well off their recent highs.
This has also dragged down MOO, which is now well off its highs yet still comfortably outperforming the S&P 500 so far this year.
Read the rest of the report here on Seeking Alpha.