Overview of At The Money: Do Agricultural Commodities Belong in Your Portfolio?
In this episode of Bloomberg’s At The Money, Barry Ritholtz speaks with Sal Gilbertie, founder, CEO, and CIO of Teucrium Trading, about whether agricultural commodities like corn, wheat, soybeans, sugar, and coffee deserve a place in an investment portfolio. The conversation makes the case that ag commodities can offer low correlation to stocks and bonds, serve as an inflation hedge, and provide upside during supply shocks such as droughts, wars, or policy disruptions.
Key Themes and Takeaways
Why agricultural commodities are different
- Agriculture is fundamentally tied to basic human needs: people eat, and animals eat.
- Demand for grains tends to be steady and growing, driven by:
- population growth
- a rising global middle class
- increased protein consumption
- feed demand for livestock
- industrial uses like ethanol and biofuels
The “Golden Grain Cycle”
- Gilbertie describes a recurring pattern in grains:
- Sideways trading near breakeven for long periods
- Sharp price spikes when supply is disrupted
- Reversion back toward breakeven
- For corn, he says the long-term breakeven range has historically been around $3.50–$4.00, and prices below that have often offered attractive entry points.
- Big rallies tend to happen when supply is hit by:
- drought
- war
- transport or export disruptions
Main drivers of grain prices
- Weather is the dominant variable
- A dry U.S. Midwest summer can sharply affect corn and soybean yields.
- “Rain makes grain” was the episode’s memorable shorthand.
- Geopolitics matters
- War in Ukraine was cited as a major example of grain prices spiking.
- Government policy and subsidies
- Farmers often operate near breakeven because governments subsidize food production to avoid social instability.
- Fertilizer costs
- Rising fertilizer prices can affect next year’s crop yields, making this a lagged but important factor.
China’s outsized influence
- China’s growing role as a buyer has changed commodity markets:
- when China became a net importer, it reshaped markets for oil, corn, wheat, and soybeans
- China is especially important for soybeans, which are heavily used in animal feed.
- Tariffs and trade tensions have shifted some demand toward Brazil, especially for soybeans.
Inflation hedge and portfolio role
- Commodities can act as an inflation hedge because rising prices for food and inputs can lift commodity prices.
- Gilbertie argues ags can be useful as a strategic allocation rather than just a short-term trade:
- limited downside near historical breakevens
- meaningful upside during supply shocks
- lower correlation with stocks and bonds than many other assets
What about climate change?
- The discussion suggests climate change may produce more volatility, not a simple one-way price effect.
- A warmer atmosphere can hold more moisture, which may actually increase rainfall and help crops in some regions.
- However, localized floods and extreme weather can still damage production and create price spikes.
Technology is boosting supply
- Modern ag technology has dramatically improved productivity:
- autonomous tractors
- precision fertilizer application
- better seeds and genetic engineering
- laser weeders and other chemical-reducing tools
- The result: technology has generally raised output faster than prices, except in drought years.
Practical Investor Notes
How investors may use ag exposure
- The guest suggests investors interested in ags may consider:
- ETFs that track specific commodities or a basket of grains
- small allocations as a diversifier or inflation hedge
- He points out that many investors are looking for assets with:
- lower correlation to equities and bonds
- defensive characteristics during market stress
Seasonal and timing considerations
- Corn prices often show seasonal patterns:
- late August can be an important time to assess crop conditions
- early October is often a seasonal low after harvest expectations are clearer
Notable Quotes and Insights
- “Everyone eats and their animals eat.”
- “Rain makes grain.”
- Grain markets tend to be calm until supply gets disrupted, then they can move sharply higher.
- The long-term investment case rests on stable demand, constrained downside, and episodic upside from shocks.
Bottom Line
The episode’s core argument is that agricultural commodities are underappreciated portfolio assets. They may not be ideal for all investors, but they can play a useful role as a diversifier, inflation hedge, and tactical opportunity when prices are near breakeven and supply risks are rising.