In the commodities complex, precious metals are having most of the fun this year, but tactical, risk-tolerant investors shouldn’t overlook the Teucrium Corn Fund (CORN).
CORN tracks three futures contracts for corn that are traded on the Chicago Board of Trade, including 35% second to expire contracts, 30% third to expire contracts, and 35% December following the third to expire. The various contract exposures help the fund limit the negative effects of rolling contracts, especially during a market in contango.
“Corn prices look set to rise over the next few weeks as extreme weather and agricultural pests put a dent in the harvest of the world’s two largest producers of the grain,” reports Simon Constable for Barron’s. “In other words, corn prices could easily reach $4 a bushel, or about 24% higher than recent prices of around $3.22.”
Corn typically trades at its cost of production and spikes during supply shocks. For example, in 2019, the USDA lowered production expectations due to unfavorable weather in the U.S. corn belt, which helped corn prices surge over 20%.
In June, reports noted corn acreage came in lower than expected. According to the USDA’s Acreage report, corn planted area in 2020 is expected to be 92 million acres, or up 3% year-over-year last year, MarketWatch reports. The USDA’s numbers came in lower than the 95.207 million acres average guess for corn planted acreage by all analysts.
“This year, futures prices for U.S. corn have taken a bashing, falling around 18% since the beginning of the year, when a bushel of the grain would fetch $3.92. That drop occurred because many traders believe that there will be a bumper harvest in the fall,” according to Barron’s.
For investors considering CORN right now, the good news is that forecasts calling for a plentiful corn harvest are unlikely to be realized.
“Experts say the expectation of a plentiful harvest may not get realized. That is because of problems in the U.S. and China. Together the two produce more than 600 million metric tons of corn annually, or more than half of the approximately one billion global supply of the grain, according to the U.S. Department of Agriculture,” reports Barron’s.
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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.