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Thanks to extremely warm and dry weather across much of the Midwest, a number of agricultural products have appeared on investors’ radars. This has especially been the case of corn so far this summer as the crucial commodity has been surging higher in the summer.
In fact, the main ETF tracking this commodity, the Teucrium Corn ETF (CORN - ETF report), has surged by 34% in the past three months and 11.5% in the past one month period. This has put the product at the top of many ETF performance lists for both the time periods and it has also caused CORN to become a much more popular and liquid fund as well (read Buy American with these Three Commodity ETFs).
The product’s incredible performance has also rekindled investor demand for commodity ETFs in general, although now investors seem to be focused in on natural resources in the agricultural market as opposed to the metal space.
This could be great news for new investors searching for new ways to play the space as a number of products have been doing quite well outside the gold and silver market, suggesting some investors have done quite well by taking a look at often overlooked commodities.
While corn was certainly one of these overlooked natural resources, that is clearly no longer the case. The commodity now attracts a great deal of media attention and is constantly in focus at numerous weather reports or crop quality updates (also read Teucrium Launches Basket Agriculture ETF).
This has made corn arguably a very crowded trade and it could push investors to look beyond the product to other top commodity ETFs in the marketplace. For these investors, we have highlighted three other commodity ETFs, besides CORN, that have had a great summer and could be worth looking at should the focus of commodity investors remain on America’s staple crop:
Teucrium Wheat ETF (WEAT - ETF report)
Much like corn, wheat has been heavily impacted by the weather. Conditions for growing the staple have been terrible not only in the U.S. but in some key grain growing regions in Europe as well. Due to this, wheat prices have also been soaring, much like their counterparts in the corn market.
Investors can easily play this trend via WEAT, another commodity product from Teucrium. This fund invests in wheat futures that are traded on the CBOT but does it in a way that looks to lower contango issues and hopefully result in better overall—and more true to the underlying commodity—returns (see more in the Zacks ETF Center).
The fund has been on an absolute tear as of late but it hasn’t exactly received the same level of hype or press that CORN has. The ETF is now up roughly 6.3% in the past one month and close to 28.7% in the trailing three month period, so not quite CORN’s gains, but still quite impressiveness nonetheless.
iPath Dow Jones-UBS Sugar ETN (SGG - ETF report)
Another agricultural commodity that has been a solid performer is in the sugar market. The commodity has been holding up well despite some weakness in other softs, making it a decent choice for many investors.
Surprisingly, drought is also impacting this market although the issue is coming from India as opposed to the American heartland. In fact, close to 50% of India is facing a drought thanks to a weak monsoon season, pushing fears over sugar prices to higher levels in recent weeks.
Meanwhile, the situation isn’t that much better in Brazil as the opposite situation—heavy rains-- have delayed production in the country’s main growing region. This part of the country is now looking to produce roughly 20% less this year as intense rains have crushed long-term precipitation averages and rocked the country’s sugar market.
This is especially important because India and Brazil are two of the five biggest exporters of the product. Some analysts now expect the global sugar surplus to decline by 27% in the 2012-2013 year, suggesting higher prices could be at hand in this corner of the market.
One of the more liquid ways to play this trend is via the iPath Dow Jones UBS Sugar ETN (SGG - ETF report). This ETN charges investors about 75 basis points a year in fees and does weak volume of about 19,000 shares a day.
However, the note has held up rather well in recent time periods as SGG is flat in the past month and has gained about 9.3% in the past three month period. While this is pretty much nothing compared to CORN’s return in the time period, this is pretty impressive when looking at SGG against the other products in the soft commodity space (see Hard Times in Soft Commodity ETFs).
This is best demonstrated by comparing SGG to the iPath Dow Jones-AIG Softs Total Return Sub-Index ETN (JJS) which is actually in the red for the trailing three month period. Furthermore, given the product’s impressive Zacks ETF rank of 1 or ‘Strong Buy’ further gains could certainly be had in this sweet commodity.
United States Natural Gas Fund (UNG - ETF report)
Another incredible performer as of late has been in the world of natural gas. The commodity had been severely beaten down to multi-year lows thanks to fracking and low demand pushing the product to unheard of levels.
However, investors have witnessed a pretty dramatic reversal in this space during the summer months as prices and demand for natural gas has soared. Luckily for investors who are looking for exposure to this segment, there are a number of choices including the ultra popular UNG (read Have the Natural Gas ETFs Finally Bottomed Out?).
This fund provides exposure to natural gas futures that are delivered to Henry Hub, Louisiana. The product does charge about 98 basis points a year in fees but sees incredible volume of over 10 million shares in a normal session.
The product has been on another solid performer in the summer months, adding about 2% in the past month—after a steep drop at the end of July-- and 18.1% in the past three month period. In fact, before UNG’s big drop to close out July and start August, UNG was performing on par with CORN, although longer term charts certainly do favor the Teucrium product.
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