Corn, Wheat ETFs Get a Shot of Turboing Leverage

Teucrium, known for its soybean, sugar and other agriculture ETFs, has brought the strategy that's turbocharged single-stock funds to the less frenetic world of corn and wheat.

In what appears to be the first time leverage has been applied to an agricultural future, Teucrium's new  Teucrium 2X Daily Corn ETF (CRXN) and the Teucrium 2X Daily Wheat ETF (WXET) employ strategies that aim to double the daily price movement of the tracked asset. In doing so, they behave much like the Direxion Daily TSLA Bull 2X Shares (TSLL), that aims to double the return of Tesla Inc. shares and Direxion Daily Semiconductor Bull 3X (SOXL), which seeks to triple the return of a basket of semiconductor stocks.

Leverage has stormed the ETF industry, with dozens of new funds seeking to double or triple the gains or declines in stocks ranging from Nvidia Corp. to Microstrategy Inc. They also aim to surpass the daily performance of a given index, or like the ProShares Ultra Bitcoin ETF (BITU), a cryptocurrency. Trading volume has surged, so that the ETFs, which barely registered on the most-active charts a year ago, now crowd the top on a daily basis.

Leveraged ETFs Top Most-Active chart

 

The new funds are essentially trading versions of two of the most popular ETFs in the Teucrium lineup, the Teucrium Corn Fund (CORN) and the Teucrium Wheat Fund (WEAT). The main difference is that the new leveraged versions offer the kind of increased volatility sought by active traders, while CORN and WEAT are for longer-term investors seeing a bullish trend for the commodities.

Leveraged Commodities

Specifically, CORN and WEAT each hold three different futures contracts, while CXRN and WXET each own a single contract, which drives up volatility.

These represent the first leveraged ETFs from Teucrium, but Managing Director Jake Hanley said investors can expect more along the same lines.

Hanley said the idea for leveraged versions of CORN and WEAT came from feedback Teucrium got from traders shortly after Russia’s 2022 invasion of Ukraine started to impact the global prices of certain agricultural commodities.

“Wheat was in the headlines, because 30% of global wheat export comes from the Black Sea region,” he said. “We took in hundreds of millions within days of the invasion.”

But, according to Hanley, traders were unhappy with the disconnect between the more volatile performance of the front-month futures contracts and the performance of the CORN and WEAT, which are designed to offer a smoother ride.

Teucrium, based in Burlington, Vt., has eight ETFs, but has filed for ETFs offering long and leveraged exposure to sugar and soybean futures.

“These leveraged funds are designed to provide two times the return on a daily basis, and they will amplify gains and losses,” Hanley said. “But if you have a bullish thesis that takes you out six months or so, that’s a different strategy.”