The Teucrium Corn Fund (NYSEArca: CORN) has surged almost 17 percent in the past month, with about half of those gains coming in the past week alone, as the market bets on a meager corn crop in the face of hot and dry weather across much of the U.S. Midwest.
The ETF’s price has climbed to $42.20 a share from just above $36 a month ago, according to data compiled by Google Finance. The fund’s assets under management have meanwhile jumped more than 8 percent since May to more than $55 million, according to data compiled by IndexUniverse.
Worries about tight corn supplies only got worse this week when the U.S. Department of Agriculture’s weekly crop progress report, released on Monday, suggested the U.S. corn crop is in the worst condition it’s been since a 1988 drought – a memory that still looms largely on farms and in futures trading pits alike.
The December corn futures contract at the Chicago Board of Trade – the first contract on the futures curve to reflect the crop currently in the ground – has been soaring and continued to climb Wednesday, hitting a nine-month high of $6.40 a bushel in morning trade on June 27, still buoyed by the USDA report. That contract has tagged on gains of 18 percent in the past week, according to a Reuters market report.
USDA June acreage data is expected Friday, but the market seems to be bracing for disappointing supply numbers. Low corn supplies mean high corn prices, something that has lifted funds like Teucrium’s CORN that own a part of that action.
CORN tracks three separate Chicago Board of Trade corn futures contracts and was the first and remains the only fund to offer U.S. investors pure exposure to the grain. The ETF was launched in June 2010.
Low current supplies notwithstanding, the corn market rose similarly, if not quite as sharply, a year ago, staging an upswing in the late spring and summer months, only to come off its peaks when harvest season in autumn was in full swing.
It seems grain traders like to factor in disasters before they actually materialize, and can sometimes be caught having to retrace their steps when they are proven too pessimistic.
About this time last year, CORN also tagged on gains of more than 11.5 percent in one month, between May 13 and June 10, when the fund neared $48 a share. The move came in tandem with downward revisions by the USDA to both the 2011 corn crop size as well as demand for corn feed last year.
CORN’s price continued moving upward through late August to push the ETF’s price through the $50 threshold.
But, as summer winded down and the harvest season loomed, the ETF began dropping sharply in September 2011, and then slowly eased for several months until it was trading somewhere around $35.50 in mid-May of this year.
Shortly thereafter, CORN began to climb again and, as noted, is now trading just above $42 a share.
It remains to be seen whether CORN’s upward momentum this time around holds, or whether it again proves to be seasonal. That means investors may have a short time to capitalize on the move.
A look at year-to-date performance shows that CORN’s impressive price hike is extremely recent because the ETF is barely in the black since the beginning of the year.
Santa Fe, N.M.-based Teucrium, founded by former commodities trader Sal Gilbertie, has a lineup of seven commodities funds targeting corn, wheat, sugar and soybeans, crude oil and natural gas.
It also markets a fund-of-funds ETF, the Teucrium Agricultural Fund (NYSEArca: TAGS) that combines its corn, wheat, soybeans and sugar funds into one equal-weighted wrapper.