5 Best Soybeans ETFs To Buy In 2022
Soybeans are one of the most grown and consumed crops globally thanks to their versatility. The war in Ukraine has increased the demand for soybeans and highlighted how important a healthy and functioning agriculture industry is to feeding billions of people worldwide. Learn more about the best ways to invest in soybeans and soybeans ETFs.
David Dierking Updated April 13th, 2022
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Should you invest in soybeans ETFs?
More than just a food product for people and animals, soybeans are used in biodiesel, biocomposite building materials, cleaning products, candles, carpets, oils, wood substitutes, foam, ink, crayons, and more. Soybean demand is growing due to the expanding global population. They make an attractive investment option because commodities have historically had a low correlation with stocks, making them well-suited for risk reduction and diversification.
The Russia/Ukraine conflict and its impact on global agriculture is just one catalyst driving the soybean rally. Along with other commodities, such as wheat and corn, soybean prices have soared.
Although Brazil and the United States lead soybean production, Russia and Ukraine are both in the top ten exporters of soybeans, and their war could create a supply shortage. Besides, droughts elsewhere have limited yields and the global fertilizer shortage is driving prices higher. The pig population, which uses soybean meal as feed, has also resumed growth, leading to more demand when supply is constrained.
With wheat and corn getting more expensive, the importance of soybeans, both as a food source and a substitute for wheat, has become even greater.
How have soybeans funds performed?
Soybean prices are up 24% year-to-date through mid-April. Soybean meal is up 16%. Soybean oil, often used in cooking, is up 33%.
Teucrium Soybean Fund is up more than 20% in 2022 through April
What about before 2022?
Through the latter half of the 2010s, soybean prices were relatively stable. In 2018, soybeans gained national attention when they became a key component of the U.S.-China trade war. At the time, around 25% of all U.S. soybean exports went to China. As the trade dispute escalated, U.S. soybean exports to China plummeted and soybean prices fell with them. Between May 2018 and May 2019, soybean prices dropped by 14%. So soybeans remain a volatile commodity.
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Is there a soybeans ETF?
Currently, there is just one soybean ETF that exclusively invests in soybeans. In addition, several other exchange-traded products can help you invest in grains and agriculture generally. These funds and notes won’t hold physical soybeans themselves. Instead, they hold futures contracts linked to soybeans. It’s a much more efficient and cost-effective way to add soybean exposure to your portfolio.
Among the choices are ETFs and ETNs, or exchange-traded notes. There are currently more than 2,500 ETFs available to investors, such as the Vanguard S&P 500 ETF (VOO), that you’re likely already familiar with.
ETNs, however, are structured a little differently. They are notes issued by financial institutions and are more like bonds than funds. Like any bond that pays periodic interest, ETNs pay the return of an index or commodity, such as soybeans. Investors are often unfamiliar with ETNs and they can be more complicated than traditional ETFs, but they can offer exposure to specific areas of the market.
The best soybeans ETFs
Soybeans ETF and ETN list
- Teucrium Soybean Fund (SOYB)
- Invesco DB Agriculture Fund (DBA)
- Teucrium Agriculture ETF (TAGS)
- iPath Series B Bloomberg Grains Subindex Total Return ETN (JJG)
- ELEMENTS Linked To ICE BofAML Commodity Index eXtra Grains ETN (GRU)
|Fund / Ticker||Holdings||Type||Expense Ratio||Assets ($m)||2022 Performance|
|Teucrium Soybean ETF (SOYB)||Soybeans||ETF||1.16%||67||23%|
|Invesco DB Agriculture ETF (DBA)||Wheat, corn, soybeans, sugar, coffee, cocoa, cattle, etc.||ETF||0.93%||1,967||14%|
|Teucrium Agriculture ETF (TAGS)||Corn, wheat, soybeans, sugar||ETF||0.13%||32||28%|
|iPath Series B Bloomberg Grains Subindex Total Return ETN (JJG)||Wheat, corn, soybeans||ETN||0.45%||60||30%|
|ELEMENTS Linked To ICE BofAML Commodity Index eXtra Grains ETN (GRU)||Wheat, corn, soybeans, soybean meal||ETN||0.75%||16||34%|
As of 4/11/2022
Let’s run through the five options for investing in soybeans.
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Teucrium Soybean ETF (SOYB)
- Investments: soybeans
- Expense ratio: 1.16%
SOYB is the only fund that offers direct exposure to soybeans only.
The ETF invests in a diversified basket of soybean futures contracts traded on the Chicago Board of Trade. It avoids the nearest-to-expire contracts but targets the second-to-expire, third-to-expire, and the “next November expiration” contracts. It invests in these in 35%/30%/35% allocations. That helps balance out some of the short-term volatility, although the fund may not 100% track the spot price of soybeans.
With an expense ratio of more than 1%, this fund is relatively expensive compared to its peers, but it does the best job of offering direct soybean investment.
Invesco DB Agriculture Fund (DBA)
- Investments: wheat, corn, soybeans, sugar, coffee, cocoa, livestock
- Expense ratio: 0.93%
DBA is perhaps the largest and best-known of the agriculture ETFs, managing just short of $2 billion in assets. It invests in ten unique commodities, with eight of them receiving allocations of 9% or more. That makes it quite balanced and diversified. If you’re looking for broad agricultural exposure, this might be the best option available.
It’s only a modest fit, however, if you want to maximize your investment in soybeans. Roughly 13% of DBA is invested in soybeans, so you won’t be getting a lot of direct exposure. But it’s not the worst option. Over the past ten years, the correlation between DBA and SOYB is 0.68. That means these two funds tend to move in the same direction despite the differences in their portfolio compositions.
Teucrium Agriculture ETF (TAGS)
- Investments: corn, wheat, soybeans, sugar
- Expense ratio: 0.13%
TAGS is another fund that invests more broadly across the agriculture space. It holds an equally-weighted portfolio that invests 25% of its assets each in corn, wheat, soybeans, and sugar. It’s a bit more targeted than DBA but does a decent job investing in the most topical agricultural commodities today.
The expense ratio of TAGS is perhaps its most attractive feature. At just 0.13%, it’s easily the cheapest to own among the group listed here. Its small size, however, works against it. TAGS has just over $30 million in assets under management. It’s more thinly traded and has higher transaction costs, negating some of that expense ratio advantage.
iPath Series B Bloomberg Grains Subindex Total Return ETN (JJG)
- Investments: wheat, corn, soybeans
- Expense ratio: 0.45%
Outside of SOYB, JJG offers the largest investment in soybeans. It links to an index that consists of three distinct commodities – wheat, corn, and soybeans. The index has a 37% allocation to corn, 34% to soybeans, and 29% to wheat. JJG is interesting because it offers exposure to perhaps the three most in-demand agricultural commodities in the world today. Its 30% year-to-date return isn’t surprising because it’s invested in the three grains that are possibly most impacted by the war in Ukraine.
It’s important to note that this is an ETN, not an ETF. JJG’s expense ratio of 0.45% is relatively cheap, but it also has a more complicated structure and is very thinly traded. An investment in this product comes with extra risks.
ELEMENTS Linked To ICE BofAML Commodity Index eXtra Grains ETN (GRU)
- Investments: wheat, corn, soybeans, soybean meal
- Expense ratio: 0.75%
GRU isn’t all that different from JJG. They’re both ETNs and target the combination of wheat, corn, and soybeans (although GRU adds soybean meal). Given their similar compositions, the higher expense ratio of 0.75% puts it at a significant disadvantage if you’re considering either of these two products. Its year-to-date performance, a gain of 33%, is among the best in this space.
💰 Which soybeans ETF is best?
If you’re looking for concentrated exposure to soybeans, the best option is SOYB. It’s the only product that offers 100% investment in soybeans. The others only invest between 13% and 40% of their portfolios in soybeans, making them an imperfect fit. SOYB is a bit more expensive but does the best job of targeting soybeans.
NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.
🔔 Did you know that you can also invest in grains like wheat and corn? Check out the top grains funds.
Direct farmland investing: alternatives to soybeans ETFs
More recently, you can also invest in farmland directly through agriculture investing platforms. These platforms let you buy stakes in parcels of farmland at a much lower minimum investment than if you dealt with the owners directly. Farmland investing platforms buy attractive parcels of land and handle all of the administrative and legal work.
You can pick plots of farmland where soybeans, wheat, corn or other crops are grown.
AcreTrader is one such platform. It scours the landscape for the most attractive opportunities, rejecting 99% of potential investments. It sets a target return of 7-9% annually, including farmland value appreciation and 3-5% cash yield each year. Its minimum investments generally start at around $15,000, and it charges a 0.75% management fee. You can read the review of AcreTrader here.