Extreme weather conditions worldwide have been reducing agricultural commodity yields, leading to a spike in food prices. Rising temperatures and debilitating droughts in the Dakotas and Central Canada have pushed wheat prices up to their highest level in nearly eight years. 

As dry conditions hamper production, the United States Department of Agriculture (USDA) expects wheat production for the 2021-22 marketing year to be 1,697 million, down 49 million bushels from its July forecast. This has sparked a rally in the commodity futures market, with Wheat futures rising to their highest level last week since May. Corn futures also gained momentum after the USDA slashed its supply and yield forecast for the commodity. Coffee prices are also on the rise, driven by the devastating frost in Brazil. And as restaurants reopen, growing demand along with constrained supply will surely translate to further price increases. Furthermore, a rise in freight costs due to pandemic-related shipping disruptions and a shortage of shipping containers could push prices to multi-year highs in the coming months. Therefore, coffee, corn, and wheat futures are positioned to skyrocket.

With this in mind, we think it could be wise to invest in commodity ETFs Teucrium Corn Fund (CORN), iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO), and Teucrium Wheat (WEAT).

Teucrium Corn Fund (CORN)

CORN facilitates exposure to one of the world’s most important agricultural commodities, which can be used as a hedge against inflation. It closely tracks an index of corn futures contracts. The fund is diversified across multiple maturities and is specialized for inclusion in a long-term portfolio. CORN has approximately $139.4 million in assets under management (AUM). Its major holdings include Corn Future Dec21 (CZ1), First American Government Obligs X (FGXXX), and Goldman Sachs FS Government Instl (FGTXX).

CORN has a 2.19% expense ratio of 2.19%, which is higher than its 0.96% category average. The ETF has gained 70.3% over the past year and 33.7% year-to-date. It has a 0.6  five-year monthly beta, indicating that it is less volatile than the broader market.

The fund closed yesterday’s trading session at $20.46 and has advanced 3% in price over the last month. Also, it is trading 11% lower than its 52-week high of $22.98. CORN’s NAV stood at $20.88.

CORN’s POWR Ratings reflect this promising outlook. The ETF has an overall B rating, which equates to Buy in our proprietary rating system. In addition, CORN has an A grade for Trade, and a B for Buy & Hold and Peer Grade. Of the 113 ETFs in the B-rated Commodities ETFs group, the fund is ranked #47.

iPath Series B Bloomberg Coffee Subindex Total Return ETN (JO)

Structured as an ETN, JO offers investors broad exposure to coffee futures. Since coffee prices tend to be  due to the concentration of its production, the fund serves as a viable option for gaining exposure to coffee prices via futures. The ETN’s primary appeal is that it closely tracks one  coffee futures contract at a time. It has approximately $93.7 million in assets under management.

JO has a 0.45% expense ratio, which is lower than the 0.96% category average. The ETN has gained 36.5% over the past year and 33.2% over the past six months. It has a 0.8 beta, indicating less volatility.

JO is currently trading at $49.98, which is just 14.6% below  its 52-week high of $58.50, which it hit on July 26. The fund has generated $833,500in net inflow over the past five days, and its NAV stood at $50.46 as of yesterday.

It is no surprise that JO has an overall B rating, which translates to Buy in our POWR Ratings system. It has an A for Trade Grade, and a B for Buy & Hold Grade. It is currently ranked #50 of 113 ETFs in the same group.

Teucrium Wheat (WEAT)

With approximately $81.7 million in assets under management, WEAT offers exposure to wheat futures contracts. The fund was the first to become a pure-play wheat ETP with  its 2011 debut. WEAT’s distinguishing feature is that it avoids the front-month contract and spreads futures contracts across multiple maturities to lower the impact of contango on bottom-line returns. Its major holdings include Wheat Future(Cbt) Dec21 (W Z1), and Wheat Future(Cbt) May21 (W K1).

The fund has a 1% expense ratio, versus the 0.96% category average. of 0.96%. It has gained 16% so far this year and 3.9% over the past month. The ETF has a 0.31 beta, indicating that it is less sensitive to market movements.

WEAT closed yesterday’s trading session at $7.18 and is trading just 4.6% below its 52-week high of $7.53. The ETF has advanced 37.2% over the past year and has seen net inflows of $3.41 million during this period.

WEAT’s strong fundamentals are reflected in its POWR Ratings. The fund has an overall A rating, which equates to Strong Buy in our POWR Ratings system. In addition, it has an A for Trade Grade, Buy & Hold Grade, and Peer Grade. WEAT is currently ranked #20 of 113 ETFs in the same group.

CORN shares fell $0.20 (-0.98%) in premarket trading Friday. Year-to-date, CORN has gained 30.04%, versus a 18.22% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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