These Country ETFs Could Be Crushed By Rising Food Prices (EPI, IDX)

If U.S. consumers have not yet felt an added pinch at the grocery or at casual dining restaurants due to surging agricultural commodities prices, it is not a bold statement to say that pinch is on the way. That is the reality of the drought that has ravaged the U.S. Midwest, wreaking havoc on corn and soybean crops in the process. Traders that have been long those commodities and select exchange-traded products have cheered these rallies on and hot money has been flowing into the commodities pits as hot weather persists across major agriculture states. However, these soaring prices are not just crimping U.S. consumers. The rally in corn, soybeans, sugar and wheat could mean more downside for some already vulnerable emerging markets ETFs. So alarming is the situation that the United Nations Food and Agriculture Organization (FAO) will publish its monthly food price index in August. August is the month the FAO usually takes a break from publishing the index, according to MarketWatch. The countries that could be potentially harmed the most by rising food prices are the 66 Low-Income Food-Deficit Countries (LIFDC). The list published by the FAO, is home to scores of emerging and frontier markets. If there is any good news, it comes in the form of the fact that ETFs tracking some of the LIFDC countries could present downside opportunities for savvy short-sellers. Here are a few to consider. WisdomTree India Earnings ETF EPI For a couple of weeks, it looked like EPI and other India-specific ETFs were finally getting their acts together. EPI gapped higher to start July, running from $16 to just below $18. Unfortunately, EPI has proven the old adage about gaps being filled true as the ETF is now hovering just over $16 once again. Since July 2, EPI has slid almost five percent. That decline coincides with an 8.2 percent pop for the Teucrium Soybeans Fund SOYB and a 16.3 percent surge for the Teucrium Corn Fund CORN. India is not a major importer of U.S. corn and soybeans, at least not yet, but that is not the issue with Asia's third-largest economy. The issue is amid slowing economic growth and a pesky inflation problem, India can ill afford higher agricultural commodities prices. India is also the world's second-largest importer of soybeans behind China. Market Vectors Egypt ETF EGPT The Market Vectors Egypt ETF has had its moments of vulnerability this year. That said, the fund has managed to be a decent performer even in the face of domestic political volatility and slack economic growth. The good news might end there for Egypt and EGPT. North Africa's largest country is also a major corn consumer. In fact, Egypt exports no corn at all and is the eighth-largest buyer of the commodity in the world.. Market Vectors Indonesia Index ETF IDX The iShares MSCI Indonesia Investable Market Index Fund EIDO could be inserted in this spot as well. Both ETFs were enjoying solid July performances until each was punished last Friday as Eurozone fears heightened. At least that is the easy excuse for the declines. Another reason for the drops experienced by EIDO and IDX is Indonesia's status as an importer of select agricultural commodities. In the 2010-11 market year, the country's imports of corn and wheat grew in a big way. Even though Indonesian corn imports have fallen this year, Southeast Asia's largest economy recently returned to the import market. From January to May, Indonesia imported 1.21 million tons of soybeans, making the Southeast Asian nation the United States' fourth-biggest export market, and taking in 465,519 tons of wheat, according to US Department of Agriculture data, The Jakarta Globe reported. Bottom line: Rising agricultural commodities prices may not be weighing on Indonesia ETFs yet, but that scenario may not be far off. For more on agricultural commodities and ETFs, click here.