Rained Out: No Pure Corn Play

By Brad Zigler

Among bull markets, corn is still a king.Other agricultural commodities may be swooning, but corn's holding its own. May CBOT futures are up nearly 38% year-to-date

CBOT Corn - May ‘08

Still, bushel prices have hung out at the $6 level for the past month while wet weather has stalled planting. Through April 28, only 10% of the nation's new crop has been planted. Historically, a quarter of the crop would be in the ground by now. Last year was no great shakes, supplywise, but by this time of year, plantings were double the current level.

The market's holding its breath for the next Agriculture Department progress report. With the foul weather, it's not likely that farmers caught up over the last week. Worse still, meteorologists are calling for continuing sogginess and cool temperatures in America's bread, er, tortilla, basket this week. Even if the rain stops, planting could be compromised by soils that can't dry out fast enough to allow aggressive fieldwork.

Bullishly minded investors can play the long side of a futures trade to line themselves up for the report, but U.S. securities investors have no pure corn play. Even the narrowest agricultural exchange-traded note offers trifold exposure, including soybeans and wheat along with corn. And that's not been good. Soybeans prices have backed off 17% from their early-March highs while wheat has dipped a teeth-jarring 41%, muting much of corn's price strength.

The iPath Dow Jones-AIG Grains ETN (NYSE Arca: JJG) is pretty much flat, up a shade less than 5% on the year. All of that gain was made early on, however, when the other grain constituents were still rising. About 36% of JJG's underlying index is comprised of corn futures, with soybeans making up 38% and wheat 26%.

Things are even more jumbled in the newer ELEMENTS MLCX Grains ETN (AMEX: GRU), which is a four-exposure play. Corn, at 35%, is about as prominent as in JJG, but wheat takes up nearly half (47%) the room in the underlying index. Soybeans take up only 8%, along with a 10% slug of soybean meal. GRU's the new kid on the block and has lost more than 5% since its February launch.

Dueling Grain ETNs

¹Returns shown for the period February 15 - May 2, 2008 for direct comparison.

Investors wanting more specificity without going directly to futures need to look to the London market where a dollar-denominated ETN offered by ETF Securities Ltd (LSE: CORN) grants exposure to the single-grain Dow Jones-AIG Corn Subindex. But for stateside investors, that's not an option. CORN, as all the other LSE-listed products offered by ETF Securities, is not open to U.S. investors.