The corn ETF is up nearly 40% over the past three months on a brutal drought in the Midwest and could push even higher if conditions worsen, according to forecasts. Surging corn prices are also lifting related agriculture ETFs and will likely have dire consequences for the U.S. economy and global hunger.
Price momentum indicates corn could rise at least 21% over the next six months, putting $9.50 a bushel or even higher into play, according to a model used by the American Restaurant Association, CNBC reports.
“It’s not infallible but it suggests that there’s definitely upside risk here in this market,” said David Maloni, president and founder of the ARA Group. “It’s alarming, that’s why we look at it. We would not be surprised to some type of blow-off occur in corn and soybeans in the coming weeks.”
Teucrium Corn Fund (NYSEArca: CORN) was up 36.9% for the three months ended Aug. 8, according to Morningstar. The ETF invests in corn futures contracts.
Other agriculture ETFs that have rallied on the drought include Market Vectors Agribusines ETF (NYSEArca: MOO) and PowerShares DB Agriculture (NYSEArca: DBA). [Why Grains Investors Should Look at Agribusiness ETFs]
The technical and fundamental picture argue that corn could push higher from these elevated levels.