Corn ETFs Powered by Increased Ethanol Allowance in Gasoline

 |  Includes: CORN, DBA
by: Tom Lydon

The amount of ethanol that can be used to power cars and trucks has been raised. The change may result in a spike in already-high corn prices and further the surge in agriculture ETFs.

The U.S. EPA announced it now will allow up to 15% ethanol to be blended with gasoline in motor fuel — but only for use in cars and trucks built since 2007. The previous limit was 10%, reports USA Today.

William Neuman for The New York Times reports that the markets were already roiling from higher corn prices. The increased use of ethanol, coupled with the government’s report that the corn harvest will be smaller this year, could send demand through the roof. Experts are sounding the alarm: if next year’s harvest is disappointing, the impact could hit consumers with full force.

There are two fairly direct ways to play the anticipated spike in corn prices as a result of the new ethanol policy:

  • PowerShares DB Agriculture (NYSEArca: DBA): Holds a percentage of corn futures

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Agriculture ETFs, Corn ETFs

  • Teucrium Corn Fund (NYSEArca: CORN): Holds a basket of corn futures

Corn ETF, Agriculture ETF

Tisha Guerrero contributed to this article.

Disclosure: None