United States Commodity Funds, the ETF sponsor behind the controversial U.S. Oil Fund (NYSE: USO) and the U.S. Natural Gas Fund (NYSE: UNG), will introduce the United States Agriculture Index Fund (NYSE: USAG) on Wednesday March 14, 2012.
USAG will track the Agriculture Index, which is comprised of 14 futures trade on ICE Futures US, ICE Futures Canada, the Chicago Mercantile Exchange and the Chicago Board of Trade. Commodities in the index currently include soybeans, corn, soft red winter wheat, hard red winter wheat, soybean oil, soybean meal, canola, sugar, cocoa, coffee, cotton, live cattle, feeder cattle and lean hogs.
The Agriculture Index is an agricultural sector index designed to broadly represent major agricultural commodities while overweighting the components that are assessed to be in a low inventory state and underweighting the components assessed to be in a high inventory state, according to ETF Daily News.
USAG will not be cheap. As the filing states, "the fund is obligated to pay the sponsor a management fee based on its average daily net assets and paid monthly at an annual rate of 0.95%."
The filing also warned about other potential cost issues.
While it is not the current intention of the Fund to take physical delivery of agricultural commodities under the Agriculture Interests, Benchmark Component Agriculture Futures Contracts are traditionally not cash-settled contracts, and it is possible to take delivery under these and some Other Agriculture-Related Investments. Storage costs associated with purchasing agricultural commodities could result in costs and other liabilities that could impact the value of Benchmark Component Agriculture Futures Contracts or Other Agriculture-Related Investments. To the extent that these storage costs change for agricultural commodities while the Fund holds Agriculture Interests, the value of the Agriculture Interests, and therefore the Fund's NAV, may change as well, according to the filing.
US Commodity Funds had 10 ETFs with $3.39 billion in assets under management at the end of February, according to data from the ETF Industry Association.
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Source: http://www.benzinga.com/news/12/03/2419940/u-s-agriculture-fund-due-out-wednesday-usag-uso-ung
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