Market Overview

Beyond CORN: Other Ways to Play the Commodity's Surge


One of the summer's most compelling story lines has been the jaw-dropping surge in corn futures. The worst Midwest drought since 1988 has dampened hopes for what was previously expected to be one of the largest U.S. corn crops on record. Last week, the USDA said nearly a third of the U.S. corn crop is in poor or extremely poor shape.

The prime beneficiary of this scenario has been the Teucrium Corn Fund (NYSE: CORN). CORN tracks a basket of the the second-to-expire CBOT corn futures contract, the third-to-expire CBOT corn futures contract and the December contract.

Traders that were fortunate enough to buy CORN a month ago may not care what contracts the fund offers exposure. A 39.3 percent gain in the span of a month is what folks really care about when it comes to CORN.

Of course, that move has prompted traders to inquire about other avenues for playing corn's rally beyond CORN. Here are a few good ideas.

PowerShares DB Agriculture Fund (NYSE: DBA) The PowerShares DB Agriculture Fund operates in an interesting fashion that often goes overlooked. Over the course of a year, "the weightings of each commodity component in the Index will naturally change based on changes in the underlying futures prices," according to PowerShares.

Translation: December corn futures now represent 15.6 percent of DBA's index. That has been enough to help DBA jump more than 13 percent in the past month. Impressive, but not nearly as impressive as the returns offered by the...

PowerShares DB Agriculture Double Long ETN (NYSE: DAG) The PowerShares DB Agriculture Double Long ETN is akin to a leveraged version of DBA in the body of an ETN. Arguably, that makes for a complex (and risky) product, but there are two things about DAG that are quite easy to understand. First, the ETN's index now has an allocation of almost 28 percent to December corn futures. Second, DAG has surged nearly 56 percent in the past month, leaving even CORN in its dust.

iPath Dow Jones-UBS Grains Subindex Total Return ETN (NYSE: JJG) In a world of opaque, convoluted ETNs, many of which go days without trading, the Dow Jones-UBS Grains Subindex Total Return ETN is a breath of fresh of air. Average daily volume of over 68,000 shares per day is decent for this type of exchange-traded product, but beyond that, JJG is easy to understand.

The ETN tracks an index that "is currently composed of three futures contracts on grains traded on U.S. exchanges," according to the iPath web site. Fortunately, that means an allocation of almost 31 percent to corn contracts as of May 31. That has been enough to send JJG higher by 35.2 percent in the past month.

GreenHaven Continuous Commodity Index Fund (NYSE: GCC) The GreenHaven Continuous Commodity Index Fund is useful for investors that are looking for one-stop commodities shopping. Not only does the ETF offer exposure to coffee and cotton, it features allocations to gold and silver as well.

Overall, GCC is home to 17 equally-weighted commodities. Grains, such as corn, soybeans and wheat, represent 17.6 percent of the ETF's total weight. GCC's equal-weight posture dampens the impact anyone commodity can have on the fund, but corn's rally has helped the ETF jump almost 8.4 percent in the past month.

For more on commodities ETFs, click here.


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