The U.S. Department of Agriculture’s monthly World Agricultural Supply and Demand Estimates report revealed that demand for corn ticked higher than supply. While it’s difficult to forecast what prices will do moving forward, it provides bullish traders with some hope.
The ag commodity’s prices have largely been trending downward. But the USDA statement was “enough to halt, at least temporarily, the bear market in corn prices,” said Sal Gilbertie, chief investment officer at Teucrium Trading, via a MarketWatch report. Teucrium offers a suite of exchange-traded funds (ETFs) geared toward providing easy exposure for investors who are looking to add agricultural commodities exposure.
Traders who were short corn responded quickly once the USDA report was released. As such, prices did tick higher, but the long-term trend remains in question.
“It looks like short sellers began to actively cover their positions upon the release of today’s WASDE, which occurs just as corn in the U.S. begins to enter the critical pollination stage of development,” Gilbertie added.
In the meantime, investors looking to get exposure to corn as an ingress to commodity exposure will want to consider using the Teucrium Corn Fund (CORN ). The fund tracks three futures contracts for corn traded on the Chicago Board of Trade. It includes 35% second-to-expire contracts, 30% third-to-expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
A Broad Ag Commodity Option
Rather than focusing on corn, investors looking to add ag commodities for portfolio diversification purposes may want to go more broad. if that’s the case, they may want to consider using the Teucrium Agricultural Fund (TAGS ).
TAGS uses a fund-of-funds structure that includes the aforementioned CORN fund. The fund can apply to both long- and short-term investors. For the former, investors can diversify their portfolios with assets that are uncorrelated with the broad market. That said, TAGS offers a perfect complement to a traditional 60/40 stock/bond portfolio in the convenience of one dynamic ETF.
Short-term traders can also use TAGS to play the volatility of ag commodity prices. As opposed to holding various futures positions in a variety of commodities, TAGS can capture this broad exposure via one fund, thereby reducing the costs of holding more than one position.
Lastly, TAGS is a compelling option given its low 0.13% expense ratio.
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