Due to improving economic conditions and inflationary concerns, global commodity prices have been soaring this year. Grains, in particular, have hit multi-year highs, which is great news for agriculture stocks such as Archer-Daniels-Midland Company (NYSE:ADM) and AGCO Corporation (AGCO).One of the big stories in the market this year has been the rise of commodities. The Invesco DB Commodity Index Tracking ETF (DBC), which tracks a basket of broad-based commodity futures, is up 28.7% so far this year, compared to the S&P 500’s 11.9% gain over the same period. Commodity prices have been rising due to the global economic recovery and inflationary concerns.
While individual commodities typically rise and fall in cycles, when many rise simultaneously, it is referred to as a commodity supercycle. That appears to be the case now. For instance, crude oil surged above pre-pandemic levels. Grain prices, which hit multi-year lows during the heights of the pandemic, have now risen to multi-year highs driven by solid demand.
Rising prices of commodities have been a boon to agriculture stocks. The VanEck Vectors Agribusiness ETF (MOO), which tracks agriculture stocks, is up over 19% year to date. Commodity prices may have taken a breather in May but have since resumed their upward trajectory, which should benefit stocks such as Archer-Daniels-Midland Company (ADM) and AGCO Corporation (AGCO).