Commodity ETFs pull in $4.5 billion, topping equity fund flows

Investors are flooding commodity exchange-traded funds with cash on signs that shortages for energy, metals and grains will spark hefty returns.

Commodity ETFs were injected with more than $4.5 billion last week, an inflow that would normally be seen over the course of a month.

In a rarity, the money going into the funds topped flows into equity and bond ETFs, which pulled in $3.8 billion and $2.3 billion, respectively. 

The sudden influx of cash comes as red-hot inflation hampers other assets. Commodities tend to be seen as a hedge against rising consumer costs. Russia’s invasion of Ukraine has also exacerbated fears of shortages for raw materials at a time when inventories across commodity markets were already tight. The Bloomberg Commodity Spot Index touched a fresh record high last week.

Agriculture ETFs racked up big investments, with the assets seeing an increase of about $468 million. Wheat prices are soaring, and futures on Monday settled at a record.

The Invesco DB Agriculture Fund, which includes a variety of agricultural commodities such as corn and soybeans, received about $270 million on Friday, the biggest-ever daily inflow for the ETF since it was launched in 2007.

Interest in agriculture is so fervent that Teucrium Trading on Monday said it suspended creation of shares in its wheat fund after selling all available shares, according to a securities filing.

Commodity prices from grains to oil to metals have been on the rise over the past year as suppliers found it difficult to keep up with the demand boom that came as economies emerged from the pandemic. Then, Russia’s invasion of Ukraine catapulted markets much higher as exports from the region dried up.

Russia is a powerhouse supplier of energy, metals and crops, while Ukraine is a top grain exporter.