Market Overview

ETFs for a Corn Plunge (AGA, PBJ)


The phrase "corn plunge," or any derivative thereof, probably sound like heresy these days. Corn, also known as maize in some countries, has been hitting record highs amid an epic drought in the U.S. Midwest. Those soaring prices mean it is only a slight stretch to call corn the Apple (NASDAQ: AAPL) of the agricultural commodities space.

Speaking of Apple, the stock is up about 3.6 percent in the past month. Not bad, unless one chooses to ignore the performance of the Teucrium Corn Fund (NYSE: CORN). CORN has surged 27.3 percent since June 21, so it is easy to see why many traders are apt to be bullish on corn.

Bottom line: Corn very well could have more upside ahead of it, but failure to prepare is preparing to fail. Do not be caught off guard if corn prices retreat. These are some of the ETFs and ETNs that should benefit.

PowerShares DB Agriculture Double Short ETN (NYSE: AGA) AGA is the bearish equivalent of the PowerShares DB Agriculture Double Long ETF (NYSE: DAG), an ETN that has been on a torrid pace in the past month. DAG and AGA track an index that now has an allocation of almost 28 percent to December corn futures.

Soybeans account for almost 30 percent of the index and that is another agriculture commodity that has benefited from corn's surge.

Before getting involved with AGA, consider the following. Finding shares might be hard and costly because Deutsche Bank halted share issuance earlier this year. Second, the ETN currently trades well above its indicative value.

iShares MSCI Malaysia Index Fund (NYSE: EWM) The inclusion of the iShares MSCI Malaysia Index Fund on this list might come as a surprise to many investors and it should be noted the ETF has risen 1.6 percent in the past month. In other words, EWM is not being hampered by rising corn prices.

However, Malaysia has acknowledged the drought in the U.S. could force chicken and pork prices there higher. That implies the impact of rising corn prices extends well beyond the confines of U.S. borders.

ELEMENTS MLCX Biofuels Index TR ETN (NYSE: FUE) Given that ethanol is a biofuel and corn is used to make ethanol in the U.S., it would not be unreasonable to expect the obscure ELEMENTS MLCX Biofuels Index TR ETN to have its day in the limelight as corn prices ascend. What might come as a surprise to some is that FUE has risen in conjunction with CORN. That implies FUE needs to be handled delicately if corn prices do come in.

PowerShares Dynamic Food & Beverage Portfolio (NYSE: PBJ) It is not a surprise that PBJ has lost ground in the past month, but it is surprising that the ETF has fallen just one percent. The ETF's lineup is chock full of companies that would appear vulnerable to rising corn prices. Fortunately for PBJ, General Mills (NYSE: GIS), a top-10 holding, has stood by its 2012 forecast despite corn's ascent.

Still, other PBJ constituents have been punished by corn prices. The fund has lagged other staples ETFs by wide margins this year and in the face of rising corn prices, PBJ is a hold at best. It might be a buy if corn prices plunge.

For more on corn and ETFs, click here.

Posted-In: Long Ideas News Sector ETFs Short Ideas Specialty ETFs Futures Commodities Intraday Update


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