We’ve written about the ongoing rise in food demand in a number of previous Investing Daily articles. There are two main factors driving this trend: the rising global population and increasing wealth, particularly in the developing world.

Below, we’ll examine an agriculture ETF that’s poised to capitalize on rising food demand, but first, here are a few reasons why rising food consumption—and prices—will be a fact of life for many years to come.

Basic Lack of Supply, Rising Demand Fuel This Agriculture ETF

The global population is not only eating more food but demanding better quality fare. For the most part, higher quality means more meat. That directly translates into rising crop consumption, because it takes about 10 pounds of corn and grain to produce a single pound of beef.

“Meanwhile, the amount of arable land is on the decline,” wrote Investing Daily analyst Benjamin Shepherd in a February 2012 article. “According to UN data, there was half an acre of arable land available for every person on earth in 1964. But due to development, pollution, population growth and a variety of other factors, that figure had dropped to 0.2 acres per capita by 2008.” 

These factors are driving both growth and price inflation in the sector, and there are a number of ways for investors to take advantage. For example, you could buy shares of genetically modified seed makers like Monsanto (NYSE: MON) or equipment manufacturers like Deere & Co. (NYSE: DE).

An Agriculture ETF That Holds the Biggest Names in the Farming Business

Another option is to buy units of an agriculture ETF like the Market Vectors Agribusiness ETF (NYSE: MOO).

This agriculture ETF gives you exposure to a wide range of businesses within the farming sector, from fertilizer makers like The Mosaic Company (NYSE: MOS) to food producers like Archer Daniels Midland (NYSE: ADM) and equipment makers like Kubota Corp. (OTC: KUBTY) and Deere.

The ETF’s top 10 holdings, from largest to smallest, consist of Syngenta AG, Monsanto, Archer Daniels Midland, Deere & Co., Potash Corp. of Saskatchewan, Kubota Corp., Agrium Inc., CF Industries Holdings, Bunge Ltd. and the Mosaic Co.

The agriculture ETF is heavily weighted toward the U.S., with 45.8% of its assets there, but it is geographically diverse, with exposure to countries such as Canada (9.9%), Switzerland (8.5%), Japan (6.7%) and Singapore (5.1%).

Potash Cartel Breakup Has Weighed on This Agriculture ETF

The ETF’s unit price declined in the first half of 2013, partly because of the breakup of the Belarusian Potash Company (BPC), through which Russia’s Uralkali, the world’s No. 1 potash producer, and Belaruskali of Belarus distribute their potash. The market is dominated by BPC and Canpotex, owned by Potash Corp. of Saskatchewan (NYSE: POT), Mosaic and Agrium Inc. (NYSE: AGU).

Together, the two cartels control 70% of global potash exports, so the breakup of BPC will result in a more fractured market, which seems likely to push potash prices lower. Shares of major potash producers fell sharply on the news, as did Market Vectors Agribusiness ETF due to its potash stock holdings, which include Agrium, Potash Corp. and Mosaic.

One factor to keep in mind is that lower potash prices would likely prompt producers to hold off on new projects. All eyes are currently on BHP Billiton (NYSE: BHP), which is developing what could be the world’s biggest potash mine: the Jansen project in Saskatchewan, Canada. BHP is continuing to invest in Jansen, though it has said it would develop the mine at a slower-than-expected pace and may look to take on a partner.

Either way, the Market Vectors Agribusiness ETF continues to offer an easy and low-cost way to profit from the long-term trend toward rising food demand. Its expense ratio is a low 0.55%.