Ug99 fungus and spurt in agriculture ETFs | 17 June 2009 | www.commodityonline.com
Crop scientists have discovered a new threat to wheat crops within the United States, leading to a race to be the first to breed a resistant wheat plant, before there is trouble. Any outcome could have a big effect on related agriculture exchange traded funds (ETFs).
Crop scientists fear the Ug99 fungus could wipe out more than 80% of worldwide wheat crops as it spreads from eastern Africa. It’s the number one threat to the world’s most widely grown crop.
Word is that the fungus has already traveled the Red Sea, and experts are saying that Northern India and Pakistan are next. Karen Kaplan for The Los Angeles Times reports that the wind will transfer it to China and Russia, and eventually North America, unless it travels by human first.
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Fear that the fungus will cause widespread damage has caused short-term price spikes on world wheat markets. Although famine has been avoided, it is still a possibility in the long run. The major goal is to create a new wheat variety that is immune to Ug99. Estimates are that 19% of the world’s crop is already in danger.
These fears aren’t just idle ones. There have been very damaging past outbreaks. The so-called Stem rust destroyed more than 20% of U.S. wheat crops several times between 1917 and 1935, and losses reached nearly 9% twice in the 1950s. The last major outbreak was seen in 1962, which took out 5.2% of U.S. crop.
Two Agriculture ETFS
PowerShares DB Agriculture (DBA): up 0.80% year-to-date; holds 25% wheat
ELEMENTS MLCX Grains Index ETN (GRU): down 0.5% year-to-date.
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