New Agribusiness ETF-- CROP

A global agribusiness small cap ETF, symbol CROP, was initiated Tuesday to track the IQ Global Agribusiness Small Cap Index.  The index consists of companies engaged in crop production and farming (30%), livestock operations (18%), agricultural supplies & logistics (23%), agricultural machinery (18%), agricultural chemicals (8%), and biofuels (9%).  The index is adjusted quarterly so these percentages are variable.

You can find the gory details of how the index is calculated here but I'll try to summarize.  Based on market capitalization, the smallest 10% of companies in the agribusiness sector are identified.  Some are eliminated because they don't meet minimum trading volume and market capitalization criteria.  All that remain are included in the index weighted according to market capitalization.  There are currently 51 companies in the index.  The process is repeated quarterly, though once included in the index, the requirements for remaining in the index are relaxed a bit.

The five largest members of the index are Viterra Inc (9%), a Canadian grain exporter; Tractor Supply Company (8%), a US retailer; Smithfield Foods (8%), a US hog producer; Nutreco Foods (6%), a Dutch aquaculture company; and Ebro Foods SA (5%), a Spanish food processor.  Though I've heard of some of these companies, the names of companies at the tail end of the index get obscure.  There seem to be a lot of Asian/Chinese companies which have gotten some bad press recently.  For example, there are some interesting comments following this Seeking Alpha article about Choada, one of the index holdings.

The ETF has an expense ratio of .75%.  At the close today it was selling at a minor discount to its NAV and 325,000 shares were traded.  I like the global aspect of CROP and the prospects that food production will be a good and stable business in the coming years.  The corporate governance and accounting practices applicable to some of these small companies is worrisome.  And, of course, CROP has no track record.  I'm keeping CROP on my list of "recruits", but for the moment, with MOO in place, I have no compelling need to take a position.