Corn May be the Next Coffee

February 20th at 8:15am by Tom Lydon

Commodities traders, active followers of commodities exchange traded products and Starbucks shareholders (NasdaqGM: SBUX) know it.

“It” being that coffee futures have been scorching hot this year. On Tuesday, the iPath Dow Jones-UBS Coffee Total Return Sub-Index ETN (NYSEArca: JO) soared 10.1% on volume that was better than six times the daily average. The iPath Pure Beta Coffee ETN (NYSEArca: CAFÉ) also gained 10% on triple the average daily turnover.  JO is now up almost 50% this year, making it 2014’s top-performing non-leveraged ETF. [Coffee ETN Goes Crazy in a Good Way]

JO is now flirting with $34, a price it has not closed above since January 13. Traders thinking they have missed out on the easy money in coffee or those looking for “what’s next” in the commodities pits may want to consider another “C” commodity: Corn, which can be accessed via the Teucrium Corn Fund (NYSEArca: CORN). [These Commodities ETFs Enter Seasonal Sweetness]

Corn futures are hovering around a key support zone was once resistance, a scenario that can prove bullish if said support holds.

“These polarity principles play a huge role in our analysis and this is a great example of why. I still believe there is an explosive move coming in Corn prices that could reach close to $600 very soon where we run into support from 2011 & 2012 as well as the flattening 200-week moving average,” notes J.C. Parets of Eagle Bay Capital.

While JO was surging on massive volume Tuesday, CORN was trying to keep pace. Sure, CORN was up just 0.88%, but that gain realized on more than six times the average daily volume. CORN has gained 5.6% in the past month.

Most of corn’s  2014 “upside has come from weather shocks in Brazil that is increasing the crop stress for corn, though may be more favorable for soybeans. Also, U.S. sales have increased despite the big news from China of the ban on the GMO variety of corn.  According to a report by Xinhua, China has rejected 601,000 metric tons of US corn, containing the unapproved genetically modified MIR 162 substance,” said Jodie Gunzberg, vice president at S&P Dow Jones Indices, in a note published earlier this month. [Commodities in the Year of the Horse]

Parets adds “bullish divergence in momentum could be the catalyst to take prices to our target. We like the risk/reward.”

Teucrium Corn Fund

ETF Trends editorial 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.

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