Thanks to extremely warm and dry weather across much of the
Midwest, a number of agricultural products have appeared on
investors’ radars. This has especially been the case of corn so far
this summer as the crucial commodity has been surging higher in the
summer.
In fact, the main ETF tracking this commodity, the
Teucrium Corn ETF (CORN), has surged by 34% in the
past three months and 11.5% in the past one month period. This has
put the product at the top of many ETF performance lists for both
the time periods and it has also caused CORN to become a much more
popular and liquid fund as well (read Buy American with these Three
Commodity ETFs).
The product’s incredible performance has also rekindled investor
demand for commodity ETFs in general, although now investors seem
to be focused in on natural resources in the agricultural market as
opposed to the metal space.
This could be great news for new investors searching for new
ways to play the space as a number of products have been doing
quite well outside the gold and silver market, suggesting some
investors have done quite well by taking a look at often overlooked
commodities.
While corn was certainly one of these overlooked natural
resources, that is clearly no longer the case. The commodity now
attracts a great deal of media attention and is constantly in focus
at numerous weather reports or crop quality updates (also read
Teucrium Launches Basket Agriculture ETF).
This has made corn arguably a very crowded trade and it could
push investors to look beyond the product to other top commodity
ETFs in the marketplace. For these investors, we have highlighted
three other commodity ETFs, besides CORN, that have had a great
summer and could be worth looking at should the focus of commodity
investors remain on America’s staple crop:
Teucrium Wheat ETF (WEAT)
Much like corn, wheat has been heavily impacted by the weather.
Conditions for growing the staple have been terrible not only in
the U.S. but in some key grain growing regions in Europe as well.
Due to this, wheat prices have also been soaring, much like their
counterparts in the corn market.
Investors can easily play this trend via WEAT, another commodity
product from Teucrium. This fund invests in wheat futures that are
traded on the CBOT but does it in a way that looks to lower
contango issues and hopefully result in better overall—and more
true to the underlying commodity—returns (see more in the Zacks ETF
Center).
The fund has been on an absolute tear as of late but it hasn’t
exactly received the same level of hype or press that CORN has. The
ETF is now up roughly 6.3% in the past one month and close to 28.7%
in the trailing three month period, so not quite CORN’s gains, but
still quite impressiveness nonetheless.
iPath Dow Jones-UBS Sugar ETN (SGG)
Another agricultural commodity that has been a solid performer
is in the sugar market. The commodity has been holding up well
despite some weakness in other softs, making it a decent choice for
many investors.
Surprisingly, drought is also impacting this market although the
issue is coming from India as opposed to the American heartland. In
fact, close to 50% of India is facing a drought thanks to a weak
monsoon season, pushing fears over sugar prices to higher levels in
recent weeks.
Meanwhile, the situation isn’t that much better in Brazil as the
opposite situation—heavy rains-- have delayed production in the
country’s main growing region. This part of the country is now
looking to produce roughly 20% less this year as intense rains have
crushed long-term precipitation averages and rocked the country’s
sugar market.
This is especially important because India and Brazil are two of
the five biggest exporters of the product. Some analysts now expect
the global sugar surplus to decline by 27% in the 2012-2013 year,
suggesting higher prices could be at hand in this corner of the
market.
One of the more liquid ways to play this trend is via the iPath
Dow Jones UBS Sugar ETN (SGG). This ETN charges investors about 75
basis points a year in fees and does weak volume of about 19,000
shares a day.
However, the note has held up rather well in recent time periods
as SGG is flat in the past month and has gained about 9.3% in the
past three month period. While this is pretty much nothing compared
to CORN’s return in the time period, this is pretty impressive when
looking at SGG against the other products in the soft commodity
space (see Hard Times in Soft Commodity ETFs).
This is best demonstrated by comparing SGG to the iPath Dow
Jones-AIG Softs Total Return Sub-Index ETN (JJS) which is actually
in the red for the trailing three month period. Furthermore, given
the product’s impressive Zacks ETF rank of 1 or ‘Strong Buy’
further gains could certainly be had in this sweet commodity.
United States Natural Gas Fund (UNG)
Another incredible performer as of late has been in the world of
natural gas. The commodity had been severely beaten down to
multi-year lows thanks to fracking and low demand pushing the
product to unheard of levels.
However, investors have witnessed a pretty dramatic reversal in
this space during the summer months as prices and demand for
natural gas has soared. Luckily for investors who are looking for
exposure to this segment, there are a number of choices including
the ultra popular UNG (read Have the Natural Gas ETFs Finally
Bottomed Out?).
This fund provides exposure to natural gas futures that are
delivered to Henry Hub, Louisiana. The product does charge about 98
basis points a year in fees but sees incredible volume of over 10
million shares in a normal session.
The product has been on another solid performer in the summer
months, adding about 2% in the past month—after a steep drop at the
end of July-- and 18.1% in the past three month period. In fact,
before UNG’s big drop to close out July and start August, UNG was
performing on par with CORN, although longer term charts certainly
do favor the Teucrium product.
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TEUCRM-CORN FD (CORN): ETF Research Reports
IPATH-DJ-A SUGR (SGG): ETF Research Reports
US-NATRL GAS FD (UNG): ETF Research Reports
TEUCRM-WHEAT FD (WEAT): ETF Research Reports
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