By Patrick Watson
Today (6/9/10) brought a new ETF-like instrument, Teucrium Corn Fund, with the memorable ticker symbol CORN. I say “ETF-like” because CORN, like nearly all futures-based exchange-traded products, is actually structured as a “commodity pool”.
CORN is essentially a way to repackage corn futures so they can be traded as securities on the NYSE Arca Exchange. Fund assets are allocated into three different corn futures contracts and should, more or less, reflect movements in the price of corn. Why should we care about corn? Aside from corn’s many and varied uses in human and animal food products, it is used in the production of ethanol fuels. The U.S. now has 140 facilities that produce more than 8 billion gallons of ethanol each year. Corn is one of the primary ingredients. Most vehicles will not run on pure ethanol, but it can be mixed with gasoline. I’ve noticed that most service stations in my area now have little stickers on the pumps informing us their gas “may contain up to 10% ethanol.”
CORN is not the first grain-oriented ETP, but it is the first to focus on just corn. The prospectus (pdf) suggests the sponsor may be planning additional funds covering other futures contracts. Relative to stocks and bonds, or even some other commodities like crude oil, corn is a relatively thin market. This fund could easily begin bumping into CFTC position limits if it attracts significant assets. It will also run into the same kind of roll risk that I mentioned in my recent post on the U.S. Brent Oil Fund (NYSEARCA:BNO).
By ETF standards, CORN will have a rich expense ratio estimated at 1.71%. Investors who want to speculate in long-term corn trends without the hassles of a futures account may find CORN to be a useful tool. More information can be found on the Teucrium Corn Fund home page and fact sheet (pdf).
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.