The rising dollar should be a problem for commodities, but some commodities exchange traded products are shaking off the strong greenback to move higher.
For example, the Teucrium Corn Fund (NYSEArca: CORN), the only corn-specific ETF on the market, is higher by almost 3% over the past week and it appears corn futures have some momentum.
During the Northern Hemisphere’s corn harvest, which usually occurs at the start of the fourth calendar quarter, there has historically been a seasonal pattern in the first nearby corn futures market where corn prices for delivery representing next year’s harvest have typically bottomed in the last four months of the prior calendar year.
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CORN provides investors unleveraged direct exposure to corn without the need for a futures account. The Teucrium Corn Fund was also designed to reduce the effects of backwardation and contango,” according to Teucrium.
Supporting the commodities outlook, the China, the world’s top consumer of metals, grains and energy, is seeing its economy stabilize. China and India loom large for corn prices and CORN going forward.
“Increased meat consumption in India: While India has slowly started moving towards a more middle-class economy, meat consumption is still low – largely for cultural reasons. The largest corn consumer, cattle, is pretty much out, but other meat categories could increase – particularly poultry/eggs. However, India’s current base is so low that we’d have to double India’s meat consumption to even make a dent in the global corn,” according to an Alliance Bernstein note posted by Dimitra DeFotis of Barron’s.
Stronger agriculture commodities prices could also lift ETFs, including the Market Vectors Agribusiness ETF (NYSEArca: MOO), PowerShares Global Agriculture Portfolio (NYSEArca: PAGG), IQ Global Agribusiness Small Cap ETF (NYSEArca: CROP) and iShares MSCI Global Agriculture Producers ETF (NYSEArca: VEGI).
Rising meat consumption is another possible catalyst for CORN.
“Increased meat consumption in US/Europe: Meat is a highly price elastic commodity, and with lower meat prices, consumers in the west have consumed more (literally, for once in our field!) However, consumers have primarily gone towards fish and poultry, which do not consume significant amounts of corn, while cutting back on dairy,” according to the Alliance Bernstein note featured in Barron’s.
For more news and strategy on the Agriculture market, visit our Agriculture category.