HardAssetsInvestor

Written by Julian Murdoch  |

December 15, 2009

Corn ... In December?

Details

Exchange-Traded Corn Exposure

There are a number of exchange-traded products with corn exposure, such as the largest commodity ETF, PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC). However, although DBC has $4.1 billion in assets, only 5.6 percent of that is in corn.

For larger exposure to corn, you can try the PowerShares DB Agriculture Fund (NYSEArca: DBA). With $2.4 billion in assets, the ETF has 12.5 percent in corn.

The nice thing about DBA is that it has good trading volume and liquidity. But if you want something with even higher exposure to corn, a handful of grain ETNs can provide it, although they do have drawbacks - mainly low trading volume and high spreads.

First, there's the Elements MLCX Grains ETN (NYSEArca: GRU). With its components divided between 26.5 percent corn, 45.5 percent wheat, rest (28 percent) in soy and soy oil, you do get plenty of exposure to corn - but you also pick up even greater exposure to wheat and soybeans. The other problem is that it is pretty small ($7.8 million); even on a good day, GRU trades only 30,000 shares.

A better choice is the iPath DJ-UBS Grains Total Return Sub Index ETN (NYSEArca: JJG), which has 31 percent of its assets in corn, 25 percent in wheat and 44 percent in soybean. It's a larger ETN than GRU, with $65 million in assets, and it anecdotally trades with relatively thin spreads (for an ETN). At least with JJG, which trades anywhere from 45,000 to 53,000 shares on an average day, you can feel relatively assured you'd be able to unload 5,000 shares without too many problems.

With corn up from the low $3 levels it hit in September - and possibly poised to continue to move past the $4 mark - it may be time to think about gaining a bit more exposure to corn. After all, it wasn't that long ago corn hit some all-time highs.

Of course, those highs were ethanol fueled, and ethanol has lost some of its appeal as the solution to high gasoline prices. But there is still room for corn to (dare I say it?) grow.