The investment objective of the Fund is to have the daily changes in percentage terms of the Shares’ net asset value (“NAV”) reflect the daily changes in percentage terms of a weighted average of the closing settlement prices for three futures contracts for corn (“Corn Futures Contracts”) that are traded on the Chicago Board of Trade (“CBOT”), specifically (1) the second-to-expire CBOT Corn Futures Contract, weighted 35%, (2) the third-to-expire CBOT Corn Futures Contract, weighted 30%, and (3) the CBOT Corn Futures Contract expiring in the December following the expiration month of the third-to-expire contract, weighted 35%, less the Fund’s expenses. (This weighted average of the three referenced Corn Futures Contracts is referred to herein as the “Benchmark,” and the three Corn Futures Contracts that at any given time make up the Benchmark are referred to herein as the “Benchmark Component Futures Contracts.
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Worried about increasing prices, short supplies, and political unrest, developing countries are stockpiling staples. Wheat touches a new 29 month high after Algeria and Saudi Arabia announce extraordinary purchases. Indonesia, which usually buys rice 200K tons at a time, tenders for 800K. JJA +0.4%.
Unconcerned that China and India are tightening monetary policy, Jim Rogers sees commodities as a win/win investment. “If the world economy gets better, commodities are going to make a fortune. If the world economy does not get better, commodities are the place to be because they are going to print more money."
The ECB warns again, noting recent purchasing managers reports show higher input prices are being passed along to consumers. It forecasts inflation will worsen in the coming months before moderating towards the end of the year. The euro jumps 100 pips before falling back slightly to $1.3490.
Macroman notes that Shanghai has fallen below its 200 day moving average and considers the worrying implications for commodities, whose fortunes have tracked Chinese shares. A divergence in performance, starting in mid-November, has widened significantly.
An agriculture company 34% owned by an affiliate of George Soros files for a $400M IPO. Adecoagro (symbol to be: AGRO), one of the largest owners of farmland in South America, plans to use the proceeds to build a sugar and ethanol mill, as well as for acquisitions.
Policymakers across Asia seem in near panic over spiraling food inflation, but is it really so troublesome? High food prices reflect greater affluence, encourage investments in crop productivity, and transfer wealth from the cities to rural areas. Think NYC to Hoopeston, IL. Can that be so bad?
Grain and bean markets are locked limit up ahead of floor trading after the USDA lowers its estimate for corn, soybean, and wheat production and ending stocks. Fertilizer stocks like the news as well. MOS +2.04%, POT +1.39%, AGU +1.54%.
At 8:30, we get the USDA's roundup of farming commodity estimates and forecasts for this year and final figures for 2010. The report will be closely read for signs of runaway price inflation following a banner 2010 in which corn futures rose 52%, wheat 47%, and soybeans 32%.
Grain and bean traders brace for the "Superbowl" of reports from the USDA tomorrow. Bullish numbers will be needed to keep feeding powerful rallies that started last summer. Current forecasts for ending stocks are so tight that a slight deviation in either direction could cause a significant price reaction.
With the price of nearly every commodity on the planet putting in astonishing runs and sitting at or near multi-year or all-time highs, Deloitte Touche Tohmatsu brandishes extrapolation skills, arguing food will become much more expensive over the next decade.
The bounce back in food prices from the GFC is complete as the FAO's index of commodities surpasses the all-time high it made in June 2008. Sugar and grains are the main culprits, but another key staple, rice, remains well below record levels.
A flood of investor capital into commodity markets too small to handle it has keyed surging prices. In an article that could have been written in Spring 2008, a former NYMEX local sees a continuation, noting "these are buyers that are completely price-insensitive -- and never sell." Never?
The CEO of Bunge (BG), seeing tight grain conditions next year, is unconvinced high prices are here to stay. Corn at $6 and beans at $14 will have Brazilian farmers planting more. “It doesn’t worry me,” says Alberto Weisser, “I think there is enough land available. There is enough water available.”
In echoes of 2008, commodities, many at multi-year or all time highs, appear to be an accepted asset class. "We are seeing investors flock to commodity resources," notes an analyst, "that pattern will continue regardless if prices move higher or lower." If they move lower?
Tom Lydon points out that the five top-performing ETPs over the past month were all products tied to crop futures, including: Cotton (BAL; +41%), Sugar (SGG; +31%), Agriculture (JJA, +20%), Corn (CORN; +20%) and Grains (JJG; +18%). A potent mix of poor weather (which has reduced crop yields in key locales) and growing global demand bodes well for a continuation of the rally, he says.
When Teucrium launched its Corn ETF (CORN) in June, a common concern was that at 1.72% in net expenses plus contango likely eating away at any rise in corn prices, the fund was too pricey. Fast-forward three months later: CORN is up a sultry 32%, six percentage points better than 28% corn-weighted PowerShares DB Agriculture Long ETN (AGF).