Commodity analysts are keeping an eye on corn futures (ZCZ24) as they hover around the $3.50-$4 range, a spot known for marking historical lows. Specifically, Teucrium analysts see prices below $4 as a solid trade opportunity - and they're noting a correlation with the action in crude oil (CLV24) around current levels.
What's Driving Corn Prices?
Corn prices have been under significant pressure lately, largely due to the massive U.S. corn crop in 2024. The USDA's report from August 2024 pegged the crop at an impressive 15.1 billion bushels, marking it as the third-largest on record. With a record yield of 183.1 bushels per acre, it's no surprise that prices have dropped. This abundance has been a major contributor to the current market slump.
With corn's current lows roughly corresponding to the futures equivalent cost of production, similar to the $40-$50 area for oil prices, Teucrium notes a potential buying opportunity, pointing out that corn has doubled from about $3.50 to over $7 three times since 2007, with each rally starting from this level.
That said, per the chart below, it's not always a quick rally from those lows - so technical traders looking to play this bounce to capitalize on this “remarkable shared history” between the two commodities may need to practice some patience.
But for investors looking to add some long exposure at these levels, that's where the Teucrium Corn Fund ETF (CORN) might be worth considering. This ETF offers investors a way to tap into corn price movements without diving into futures trading.
The exchange-traded fund (ETF) tracks the Teucrium Corn Index, reflecting daily changes in corn futures prices. With a net asset value of $57.94 million and a 1.00% expense ratio, it provides a relatively cost-effective way to access the corn market.
Overview of Teucrium Corn Fund ETF
The Teucrium Corn Fund (CORN) is a unique exchange-traded fund (ETF) in the agricultural sector, offering investors direct exposure to corn futures without the need for a futures account. Since its launch on June 11, 2010, CORN has carved out a niche as a specialized commodity ETF, focusing exclusively on corn futures contracts.
At the heart of CORN's appeal is its innovative strategy designed to provide transparent and stable exposure to corn prices. Unlike many commodity ETFs that concentrate on near-term futures, CORN spreads its investments across different contract maturities of Chicago Board of Trade (CBOT) Corn Futures. This approach serves a dual purpose: it not only provides a more accurate reflection of corn prices but also aims to mitigate the effects of contango and backwardation, common issues that can erode returns in commodity ETFs.
The fund's structure as a commodity pool is key to its operation. It allows direct investment in futures contracts without the need for physical corn storage. This structure enables CORN to track corn prices closely while implementing its unique strategy.
By avoiding investment in front-month (spot) futures contracts, limiting the number of contract rolls each year, listing all holdings nightly, and providing future roll dates to investors, CORN offers a level of transparency and predictability that sets it apart in the commodity ETF space.
CORN has approximately $55.34 million in assets under management (AUM). The shares are down 20.5% on a YTD basis, and are hovering around new multi-year lows.
Despite the challenging price action, CORN maintains reasonable liquidity with an average daily trading volume of around 55,000 shares. Notably, for traders seeking a quick entry and exit on their trades, it's worth keeping a close eye on spreads and using strict limit orders to reduce slippage.
The fund's expense ratio of 0.25% remains competitive for a specialized commodity ETF, adding to its appeal for cost-conscious investors. But as a heads-up for income investors, CORN's focus on tracking the underlying price action in its focus commodity means it does not pay dividends.
Additionally, potential investors should be aware of the tax implications associated with CORN's structure. As a commodity pool, investments in CORN result in the issuance of a K-1 form at tax time, subject to blended tax treatment, which may add complexity to tax filing for some investors.
Conclusion
For non-futures traders looking to dabble, CORN continues to offer a unique, direct vehicle to gain exposure to corn futures in a brokerage account, which can potentially diversify a portfolio. As the ETF tests a historically significant price point, CORN could be worth a second look here.
That said, investors who are unfamiliar with the specific, unique risks of playing the commodities market - from geopolitics to weather - should proceed with caution before jumping in to play this projected CORN rebound, since the agriculture market can be an unforgiving place for the uninitiated.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
