Commodities: Agriculture Grains
The Grains segment targets a very specific niche within the larger agriculture space that consists of three core grains contracts: corn, wheat and soybeans. JJG, our analyst pick, dominates
“JJG dominates the segment in every measure ” the segment in every measure and has clearly established itself as the "go-to" product for investors wanting targeted exposure to grains. Its $100M+ in AUM covers over 90% of total grains ETF assets, and its $2.5M+ in daily volume makes up virtually all of the segment's total trading volume. Like our benchmark, JJG carries heavy exposure to the three grains and implements a front-month futures rolling strategy, so it's no surprise that JJG has the highest Fit score. Despite underweighting corn and including soybean meal (absent entirely from our benchmark) in its holdings, JJG provides excellent exposure to the overall grains space.
Competitor GRU is significantly less liquid, with an onscreen liquidity of just $25K daily. Like JJG, at inception, GRU was heavily concentrated in the three core grains, although it also carried a 9% weighting in soybean oil. WEET and FUE stray significantly from our benchmark—both ETNs are also barely tradable, so caution is warranted here. WEET utilizes an optimized strategy (instead of a front-month strategy) in choosing the contracts for its 6 commodities it tracks. FUE specifically targets biofuels commodities, and at inception, it not only excluded wheat, but also reached far beyond the core grains and included soybean oil, sugar, canola and barley. (Insight updated 11/22/17)
ETF.com Efficiency Insight
JJG is clearly the standout here. It was the first-to-market exchange-traded product specifically targeting the grains space, and its $100M+ in AUM firmly puts the ETN at a low risk of
“WEET is the outlier here and charges a full 10 bps more than its competitors” closure. Meanwhile, the 3 other ETNs in the segment have little to no assets and all carry a high risk for closure; for example, GRU is the next largest fund, with only $7M in assets. Costwise, JJG's 75 bp expense ratio puts it on par with GRU and FUE. WEET is the outlier here and charges a full 10 bps more than its competitors.
All four products are structured as ETNs, and thus have no specific tax advantage over one another: All are taxed like an open-ended equity fund. (Insight updated 11/22/17)
ETF.com Tradability Insight
JJG is a no-brainer when it comes to Tradability. With over $2.5M changing hands daily, JJG is really the only viable option for those wanting to actively trade in the grains segment. In
“JJG is really the only viable option here for those wanting to actively trade ” comparison, GRU, the second-most-liquid ETN, has a median volume of less than $25K, which amounts to a small fraction of JJG's daily volume.
Be extremely careful with both FUE and WEET, as they barely trade. Both FUE's and WEET's median daily volume is zero, meaning on at least half of the days over the past 45 trading days, no shares changed hands.
Bid/ask spreads for JJG average only 11 bps, compared with its competitors, whose average spreads range from 30 bps to hundreds of bps. JJG also carries high marks for implied liquidity for those looking to trade in size—although so do all the other funds. (Insight updated 11/22/17)
ETF.com Fit Insight
The four ETNs targeting the grains space have vastly different exposures to the 3 core grains commodities—corn, wheat and soybeans—with some reaching far beyond these core
“The four ETNs have vastly different exposures to the 3 core grains commodities” commodities by design. Like our GSCI benchmark, JJG follows a front-month futures strategy, meaning it rolls over contracts to the next available contract when holdings near expiration. WEET follows an optimized strategy—it picks certain contracts in order to mitigate the effects of any contango. With the grains market largely in contango, both JJG and WEET look to have some strong advantages relative to the benchmark.
JJG is a great Fit to our benchmark: It's heavily weighted in corn, wheat and soybeans, and strays only by overweighting soybeans. The three remaining ETNs add a bit more flavor to the mix beyond just the 3 core grains. WEET throws in both soybean meal and soybean oil, while underweighting corn and wheat significantly. Like JJG, at inception, GRU held significant weights in the three core grains commodities, but also held a small exposure to soybean oil, which is absent from the benchmark entirely. FUE has a unique focus on commodities associated with biofuels, and significantly strays from what would be considered a grains ETN. At inception, FUE was exposed to 6 commodities: corn, soybeans, soybean oil, sugar, canola and barley, but not wheat. (Insight updated 11/22/17)