CORN: A Commodity Futures Strategy For Those Seeking Exposure To Corn (NYSEARCA:CORN)

The Teucrium Corn Fund ETF (CORN) is a single-commodity futures exchange-traded fund designed to provide investors with direct exposure to the corn futures market. The strategy is passively managed, meaning that CORN will only provide exposure to commodity futures without the intent of earning in excess of the performance of the underlying corn commodity futures contracts reflected in the benchmark. Given that the fund only invests in a single commodity, CORN may be considered as a speculative trading vehicle and may not be utilized as an equity market hedge as would a diversified commodity portfolio.

About Teucrium Corn Fund ETF

CORN was launched by Teucrium on June 9, 2010, on the NYSE Arca Exchange. CORN has a net expense ratio of 61bps, on par with peer commodity futures strategies. CORN currently has ~$185 million in net assets with an average of $11.7 million in share value changing hands on a daily basis.

CORN was designed to track the performance of the Teucrium Corn Index, a benchmark made up of 3 distinct dated corn futures contracts. The Index tracks the performance of short-, medium-, and long-dated corn futures contracts in order to gain exposure to the market. The short-dated futures contracts are generally 3 months out to expiration. The medium-dated contracts currently expire 6 months out in December 2026, and the long-dated contracts expire at the close of the following calendar year in December.

CORN is generally viewed as a speculative trading vehicle reflecting the price changes of the underlying commodity. The fund is passively managed, meaning that CORN will not aim to beat the benchmark through active trading strategies. As a result of this, CORN will reflect price fluctuations as they relate to the price of the underlying commodity throughout any market cycle. For all intents and purposes, investors can utilize CORN if they perceive that the commodity will undergo a bull cycle or take a short position during a bear cycle.

Given that CORN solely provides exposure to corn rather than a diversified basket of commodities, CORN may not be considered as an equity market hedge. While the underlying value of corn may not be correlated with the equity market, the speculative nature of commodity pricing may not be an effective hedge to the broader market.

CORN could potentially be used as a hedge with respect to companies that participate in the value chain of corn given the diverse industrial nature of the commodity. Corn is used in a variety of products for making food, animal feedstock, rye whiskey, ethanol, and renewable diesel & biodiesel, amongst others.

The price of corn can be influenced by a variety of factors such as weather, general supply & demand, international trade policy, fertilizer prices, and interest rate policy, amongst other factors. Given the number of influences tied to the pricing of corn, CORN can generally be considered a speculative trading vehicle with no fundamental value drivers to influence the share price. Investors should note that as the futures contract nears expiration, the value of the contract will gradually converge with the spot price of corn.

Investor Suitability

CORN can be utilized by those seeking to actively trade CORN futures in standard brokerage accounts or for hedging purposes. Given that CORN provides exposure to a broad range of dated futures, investors can capture long-term exposure to corn futures pricing. CORN can also be used to hedge equity exposure with respect to companies participating in the value chain for corn, like food production.

Additional Risks to Consider

CORN is a speculative trading vehicle that provides direct exposure to corn futures and will not bear active returns relative to the underlying benchmark. The price of CORN can be influenced by a variety of factors tied to the underlying commodity and futures derivatives, including weather, supply & demand, interest rates, and the cost of carry, amongst other factors.

Final Thoughts

CORN is a passively managed commodity futures ETF designed to capture the price performance of corn. The strategy can best be utilized by those seeking to speculatively trade corn given the direct exposure to the futures basket or used to hedge risk to a certain extent. Given that CORN isn’t a diversified commodity portfolio, the strategy can be considered as highly speculative and may not provide investors with a broad market hedge.

This article answers three questions about CORN:

1. What is CORN’s objective?
2. What influences CORN’s performance?
3. Which investors would be interested in using CORN in their portfolios?

Editor’s note: This article is intended to provide a general overview of the ETF for educational purposes only and, unlike other articles on Seeking Alpha, does not offer an investment opinion about the ETF.