At The Money: Do Agricultural Commodities Belong in Your Portfolio?

**SPEAKER_2** (0:02)
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**Barry Ritholtz** (0:20)
Investors today can gain exposure to any asset class via ETFs, stocks, bonds, real estate, metals, energy, even crypto. One of the most overlooked sectors are agricultural commodities, wheat, soybeans, corn, sugar, coffee, all sorts of diversified commodities.
The ETF structure means a very different kind of K1. I'm Barry Ritholtz and on today's edition of At the Money, we're going to explore the question of whether agricultural products deserve a place in your investment accounts. To help us unpack all of this and what it means for your portfolio, let's bring in Sal Gilbertie. He's the founder, CEO, and Chief Investment Officer of Teucrium Trading, best known for creating exchange traded products that give investors direct exposure to AG futures. He's also an old school commodities trader since 1982, trading various agricultural and energy commodities. So, Sal, let's start really basic. What makes agricultural commodities so fundamentally different from other commodities like energy, metals, or equities, or bonds as an asset class?

**Sal Gilbertie** (1:42)
Sure. And thanks for having me, Barry. It's always fun to be with you and talk with you.
Let's face it, everyone eats and their animals eat. And that's what AGs are primarily used for, although, you know, fuel now has come into the mix. But AGs are very stable commodities in terms of the downside historically. And, you know, we all know past performance is indicative of future results and all that. But the downside on AGs is very limited because farmers will just stop planting if they're losing money. And the secret with AGs is that demand continues to rise. So the combined global demand of corn, soybeans and wheat since 1960, OK, rises every single year. It's a record or it's almost a record. So it's either the second highest ever or the highest ever every single year since 1960

**Barry Ritholtz** (2:34)
So is that is that, Sal, is that driven by population growth or is it driven by?
I'm thinking about beef, which seems to not only be benefiting from the whole keto trend, but rising wealth in the rest of the world means people are eating more protein and less of other things. What's the underlying driver of increased demand for commodities?

**Sal Gilbertie** (2:57)
You just hit it. OK, basically, the underlying driver is a rising population. And more importantly than that, a rising middle class, the people that rise from the bottom to the next level. OK, so if you look up people who are in sustenance living, which they used to be defined as, I think, less than $10 a day, $10 equivalents a day of the moment they rise from that. And there are hundreds of studies on this. They increase the protein in their diet. They increase eating meat. That's what they do. And that is a huge demand. The number one demand around the world for corn is feeding cattle, is feeding animals in general, feeding animals.
The second highest demand is for fuel. So, you know, corn goes into ethanol and corn goes into, sorry, soybeans go into biofuels. And so what happens is the rising global population, the rising middle class, the growing middle class, which has become huge, by the way. I think as a percentage of the population, we're in our lowest ever percent of people in the bottom, the bottom rung, which is-

**Barry Ritholtz** (4:01)
That's amazing. Does this mean we're gonna see beef, B-E-E-F-F, B-E-E-F-E-T-F from you sometime soon?

**Sal Gilbertie** (4:09)
No, it's really hard. To get people to think about eggs is really hard. It's amazing to me.
You know, we always say corn is in everything, right? So number one use is feeding animals. Number two use is ethanol production. It's in, so it makes starch, right? If you use paper, you're using corn. People don't realize that. So it's literally impossible for anyone, anywhere on planet Earth, to not be using corn every single day, either directly or indirectly. It's not possible. And people don't understand that. It's a vital commodity. And so the going back to your original question, I believe, you know, it's a commodity, so it's volatile, but it has this floor because governments around the world subsidize food production. They subsidize their farmers because you don't want your populace to destabilize because they're hungry and you lose power. So everybody subsidizes their farmers. So farmers get used to operating at break even. And that actually is, I think you mentioned it, the golden grain cycle. We can get into it, but grains kind of flatline and get used to trading there. And because that demand is basically static, it's not a dynamic demand, it's just always growing. It doesn't really fall significantly.