Corn ETF (CORN) Debuts

by on June 9, 2010 | Updated November 6, 2012 | ETFs Mentioned:

The last two years have seen a tremendous surge in the number of exchange-traded products available to U.S. investors. While there have been several “copycat” products to hit the market, the vast majority of new fund launches have focuses first-to-market ETFs unlike anything already out there. Skeptics have been saying for a while that all the good ideas are taken, but these theories have been repeatedly shot down as new ETFs have burst on to the scene and rapidly accumulated assets [see also Jim Rogers Says: Buy Commodities Now, Or You’ll Hate Yourself Later].

Vermont-based Teucrium Trading LLC is hoping that the next smash hit in the ETF industry is corn. That’s right, corn. Teucrium is set to launch the Teucrium Corn Fund ETV (CORN) this week. CORN would be the first exchange-traded product to offer pure play exposure to corn prices. Like most commodity ETFs, CORN will achieve exposure to the underlying commodity through futures, in this case contracts traded on the Chicago Board of Trade. But unlike a lot of products out there, CORN won’t invest exclusively in near month contracts; assets will be split between second-to-expire futures (35%), third-to-expire futures (30%), and futures expiring in the December following the expiration month of the third-to-expire contract (35%). [Check out the Commodity Guru ETFdb Portfolio]

Corn futures traded on the CBOT settle five times a year, in March, May, July, September, and December. That means that upon launch, CORN’s holdings would consist of September 2010 and December 2010 contracts, as well as longer dated December 2011 futures. That makes CORN unique; most commodity products either concentrate holdings in near month contracts and roll on a monthly basis (such as UNG) or spread assets across 12 different contracts [see also Invest Like Jim Rogers With These Three Agriculture Stocks].

Corn futures are a component of many broad-based commodity products and more targeted agricultural ETFs and ETNs (it makes up about 12.5% of DBA). But CORN will be the first exchange-traded product to focus exclusively on corn futures. It’s tough to tell how the new product will be received by the market. Inflows to commodity ETFs over the last year have been staggering, as investors have embraced the exchange-traded structure as an efficient means of establishing exposure to natural resource prices. Moreover, despite tame recent data releases, anxiety over a surge in inflation remains at an all time high, and CORN could get some love from investors looking to protect asset values against a wave of rising prices (see Beyond TIP: Ten ETFs To Protect Against Inflation). At the onset on an inflationary environment, food prices are often among the first to rise, making exposure to agricultural products appealing (see Why The Chinese Yuan Could Drive U.S. Inflation).

The new corn ETF will charge an expense ratio of 1.0%, above the average for the Agricultural Commodities ETFdb Category.

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Disclosure: No positions at time of writing.