HardAssetsInvestor

Mike Norman, Hard Assets Investor (Norman): Hello everybody, and welcome to HardAssetsInvestor.com. I'm Mike Norman, your host. Well, single-commodity ETFs are here; finally. I don't know what took it so long to happen, but we have here the founder of Teucrium Trading, Sal Gilbertie. Thanks very much for being on the show; I appreciate it.

Sal Gilbertie, founder, Teucrium Trading (Gilbertie): Glad to be here, Mike.

Norman: So commodities have been in a boom for a number of years now; many investors — small investors, institutions — now embracing commodities as an asset class. But one thing we haven't seen until now is single commodity ETFs — a corn ETF, soybean ETF. Your company has created those vehicles, many of them very, very recent. Talk about what you have now in these new offerings that you have.

Gilbertie: We have six single-commodity exchange-traded products — a crude oil fund, a natural gas fund and our flagship — which has been the corn fund. And we just recently listed soybeans, wheat and sugar as single-commodity funds. The unique thing about this, and the reason Teucrium was formed, is that commodities as an asset class really developed into the mainstream since 2004, 2005 … more institutional and really sophisticated investors. As more and more investors come to the fore, as more and more people are taking control of their own financial destiny, they become asset allocators, they become traders of things that they may not have traded before. And what these ETPs do is bring access to those people, directly into commodities without them needing a futures account.

Norman: Right. Before, they’d have to use futures if they wanted to trade corn or soybeans. And now, with the exception of wheat, we know there's been gold, the GLD. You had USO for crude oil — there was a natural gas ETF. But the others were missing. But now we have corn — “CORN” — and we have the soybean contract. For one, obviously, they don’t have to use futures anymore, as you said. But do you think this'll really take off to the extent that some of the larger commodities — the gold and the oil — have?

Gilbertie: Well, I think everything’s relative in respect to the commodities. We do believe that corn is the most pervasive commodity, besides energy, in the economy. No one can go throughout the modern economy without interacting with some corn product all day long. So, people are more and more gaining the realization that they must include corn in their portfolio. Many people are overweight in precious metals and energies. They are learning that they need to overweight some of the ags, or would like to. And so as people begin to not only understand asset allocation models and that in most current asset allocation models of large funds and large well-known indexes, the energies and the ags — especially the big four: corn, soybeans, wheat and sugar — are really a fairly significant allocation in people's portfolios.

The other thing is there's supply uncertainty with agriculturals. They must be produced every year. We use almost every bit of the supply that's produced each year. So, you can't grow a crop in the winter. If there's a crop failure, the demand really doesn’t abate that much. Demand in agricultural products is quite inelastic. People and animals continue eating. Now it’s being integrated into the food supply and we're not yet at the point where the corn and ags are so integrated into the industrial economy that even a global slowdown, economic slowdown, affects them that dramatically. It does temporarily, but it more affects, in our opinion, people's purchases. So you'll see purchases slow down as prices of everything kind of come down. But you really see a rebound quite often, especially in the agricultural commodities. Again, people like to eat and their animals like to eat.

Norman: I certainly do, I'll tell you that.

Gilbertie: And so it's important to have those in your portfolio.