The Future of Farming: Exploring Common Threads Across 4 Major Agricultural ETFs (MOO, VEGI, DBA, KROP)

These ETFs maintain strong potential for long-term market outperformance.

Jan 28, 2025

As we enter 2025, individuals and companies increasingly adopt sustainable and eco-conscious practices. In Europe, for example, large companies now must follow sustainability compliance¹ under new non-financial reporting directives, which mandate the disclosure of environmental and social information in their annual reports. This has already created a strong demand for consulting firms that help companies transition to ESG reporting. A win-win situation, but for whom?

Yet, while sustainability advances, agribusiness confronts its own set of challenges. Speaking specifically, the industry faces² economic uncertainty and volatility, marked by declining net farm income since 2024. The decline in income, in particular, has put pressure on farmers, leading to squeezed margins for many. Still, there's hope for optimism — the global agricultural commodities market is estimated³ to grow at a CAGR of 4.2% from 2025 to 2030, reaching USD 4.4 trillion by 2033. This might surprise you, but you can also benefit from this landscape from an investing perspective.

To better understand the market's current state and future direction, let's look closely at four key agribusiness ETFs: VanEck Agribusiness ETF MOO 0.00%↑, VanEck Vectors Agribusiness VEGI 0.00%↑, Invesco DB Agriculture Fund DBA 0.00%↑, and Global X Agriculture KROP 0.00%↑. Can you already guess which themes connect these funds?

#1 Agricultural Sector: Four Paths, One Market

All four ETFs — MOO, VEGI, DBA, and KROP — are rooted in agribusiness. Who would have guessed, right? Nevertheless, each and every one of them covers different subindustries. For instance, MOO invests in companies specialising in agrichemicals, animal health, and farm or irrigation equipment, while VEGI encompasses the entire value chain. You can see the interconnection in one way or another – agrichemicals and irrigation equipment are different points in the value chain of the ETFs.

Unlike MOO and VEGI, DBA and KROP take different approaches to agricultural investment. In fact, DBA focuses on agrarian commodities rather than stocks, tracking the DBIQ Diversified Agriculture Index through futures contracts in wheat, corn, coffee, cotton, and other raw materials. KROP, in turn, targets companies demonstrating technological innovation in agriculture and food, including AgTech, agricultural robotics and automation, and agricultural biotechnology.

In short, these ETFs offer different ways to diversify within the agricultural sector. KROP specifically targets agricultural innovation leaders, while DBA provides direct exposure to commodity prices as an inflation hedge. Quite a plot twist, right?

#2 IoT, AI, ML, and even farm robotics

Let’s also not forget about the technologies that surround us daily – AI and IoT. Practically speaking, the ETFs' portfolio companies highlight emerging technological trends, with precision agriculture and farm robotics leading the way. As a vivid example, KROP focuses on companies advancing precision agriculture and automation, whereas VEGI includes firms specializing in farm machinery and equipment. Even though both ETFs – KROP and VEGI – have innovative companies in their portfolios, the innovation or technology derives from different aspects. For some, it is all about cutting-edge advancements like automation and replacing manual jobs; for others, it is investing in R&D to advance the products. Both strategies, of course, work great individually. However, it is a rare case when they don’t create something industry-changing when combined.

Another key development is controlled environment agriculture and biotechnology. For instance, MOO invests in equipment manufacturers integrating IoT and AI, smart irrigation system developers, and precision agriculture firms. At the same time, KROP targets companies using IoT sensors for agricultural monitoring, AI and ML for farming analytics, and robotics and drone technology. In this case, both of these ETFs focus on the latest technological advancements.

While VEGI and DBA currently don't prioritize advanced technologies, this focus may shift as their portfolio companies acquire innovative businesses. It’s always a good idea to keep an eye on such ETFs and see what the future holds, as they may soon incorporate the latest technological advancements.

#3 Market opportunity: growing global food demand

One thing is clear: MOO, VEGI, DBA, and KROP are well-positioned to capitalize on increasing global food and agricultural demand. It's their final goal at the end of the day. Statistics tell us the same story: the world's population is expected⁴ to expand from 7.8 billion today to nearly 10 billion by 2050. According to UN estimates⁵, feeding this larger, more affluent population will require a 70% increase in food production compared to 2015. This growth creates substantial opportunities across the agricultural value chain — from equipment manufacturers to seed producers and food processors.

Due to evolving dietary preferences, the meat and dairy sectors are expected⁶ to experience robust demand growth, even though this production is not as sustainable as it seems. Projections suggest that meat production must increase by 200 million tonnes by 2050. In addition, demand for fruits and vegetables is set to surge, representing⁷ 33% of the projected growth in agrifood demand.

While MOO, VEGI, DBA, and KROP can address most global food demands, there are immediate challenges. Agricultural companies must navigate volatile commodity prices, rising input costs, and trade uncertainties. Weather patterns and external events, such as natural disasters, can also dramatically affect company performance and commodity values, highlighting the sector's exposure to short-term risks and market volatility. All these hurdles are vividly illustrated in the ETF group's performance.

Wrapping up: performance and future outlook

The four agribusiness ETFs — MOO, VEGI, DBA, and KROP — have delivered mixed results recently, reflecting the sector's complex dynamics. The Invesco DB Agriculture Fund (DBA) stands out as the leader, delivering⁸ a +27.3% total return over the past year and outperforming the S&P 500 since early 2023. In fact, it is the only one most likely to beat the market or at least have a robust performance.

Meanwhile, the other ETFs have faced headwinds. VanEck Agribusiness ETF (MOO) declined⁹ 15.3% in 2024. The iShares MSCI Agriculture Producers ETF (VEGI) and Global X AgTech & Food Innovation ETF (KROP) also lagged, posting total returns of -4.63%¹⁰ and -8.02%¹¹, respectively for the year ending December 31, 2024. This encompasses the sector's exposure to short-term risks and market volatility, warning investors of all stages.

Looking ahead, these ETFs maintain strong potential for long-term market outperformance. Their diverse exposure across the agricultural sector, from equipment manufacturers to seed producers and food processors, favorable demographic trends, and rising food demand support an optimistic outlook. The ongoing technological transformation in agriculture could fuel future growth, especially benefiting innovation-focused funds like KROP.

Perhaps the future has already prepared a basket of colorful eggs for us. Who knows?

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