The amount of ethanol that can be used to power cars and trucks has been raised. The change may result in a spike in already-high corn prices and further the surge in agriculture exchange traded funds (ETFs).
The U.S. EPA announced it now will allow up to 15% ethanol to be blended with gasoline in motor fuel — but only for use in cars and trucks built since 2007. The previous limit was 10%, reports USA Today. [Ag ETFs: Withering Crops, Growing Prices.]
William Neuman for The New York Times reports that the markets were already roiling from higher corn prices. The increased use of ethanol, coupled with the government’s report that the corn harvest will be smaller this year, could send demand through the roof. Experts are sounding the alarm: if next year’s harvest is disappointing, the impact could hit consumers with full force. [Farming Your Agriculture ETF Options.]
There are two fairly direct ways to play the anticipated spike in corn prices as a result of the new ethanol policy:
- PowerShares DB Agriculture (NYSEArca: DBA): Holds a percentage of corn futures
- Teucrium Corn Fund (NYSEArca: CORN): Holds a basket of corn futures
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.