[Derivative Products ABC] Did You Know You Can Invest in Agricultural Products Through Derivatives?

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[Asia Economy Reporter Ji-hwan Park] Recently, global abnormal climate phenomena have increased interest in the supply of agricultural products. Many people may have thought at least once, "If I buy agricultural products on a large scale and release them to the market when supply is scarce, wouldn't I make a lot of money?"

However, agricultural products are difficult to hold physically without large-scale warehouses equipped with refrigeration devices. For this reason, it is difficult for individuals to implement such direct investment methods.

So, is it possible for individual investors to invest in agricultural products through financial products without holding the physical goods? It is possible through funds or exchange-traded funds (ETFs) that include various agricultural products.

There are a total of three agricultural futures ETFs listed on the domestic stock market. The largest product by market capitalization is 'TIGER Agricultural Futures Enhanced (H)', which benchmarks the 'S&P GSCI Agriculture Enhanced Select Index ER'.

There is also 'KODEX 3 Major Agricultural Futures (H)', an ETF that tracks the 'S&P GSCI Grains Select Excess Return' index. This product has the advantage of allowing diversified investment in agricultural futures with a small amount. It is linked to the prices of corn futures, soybean futures, and wheat futures listed on the Chicago Board of Trade (CBOT). In the case of 'KODEX Soybean Futures (H)', which tracks soybean futures prices, it reflects international soybean price movements through currency hedging against won-dollar fluctuations.

There is also a way to invest in agricultural-related ETFs in the U.S. market. ETFs with a significant portion of investment in soybeans include 'SOYB (Teucrium Soybean Fund)', 'CORN (Teucrium Corn Fund)', which tracks corn futures prices, and 'DBA (Invesco DB Agriculture Fund)', which consists of 11 agricultural products and grains.

Experts advise that there are many points to be cautious about when investing in agricultural products. The most representative is that there are inherent risks related to physical assets. Agricultural-related financial products are more affected by crop yields due to climate change and political issues than stocks or bonds.

Additionally, exchange rate fluctuation risks must be considered. Since these products are settled in dollars, foreign exchange losses may occur independently of the actual asset price fluctuations.

This content was produced with the assistance of AI translation services.