How to Invest in Corn
Corn is generally perceived as a dietary staple, but the market for this agricultural commodity extends far beyond the dinner plate. Corn’s largest use is actually in animal feed, meaning that demand for this resource is tied to demand for protein intake and global population growth. Corn is also used in a number of other applications, including biofuels, sweeteners, and other consumer products.
Corn has appeal as an investable asset because it can serve as a hedge against inflation brought about by increases in food prices. Moreover, some see corn as an asset that should appreciate if emerging markets continue to develop and urbanize at an impressive rate.
Investors seeking exposure to corn have a number of options; in addition to an exchange-traded fund, corn futures are heavily traded and extremely liquid.
Ways to Invest in Corn
There are 3 ways to invest in Corn: ETFs, Futures, and Stocks. Click on the tabs below to learn more about each alternative.
What are Corn ETFs?
ETFs offer an interesting opportunity for investors to gain exposure to corn prices, as this approach requires minimal trading activities or maintenance from the individual investor. For U.S. investors, the Teucrium Corn Fund (CORN) is the only pure play option for corn exposure, though corn is included in a number of broader agricultural ETFs and commodity indexes as well. CORN spreads exposure to corn futures across three different maturities in an attempt to more closely match spot prices. Investors should note, however, that the underlying assets are corn futures, and that as such CORN won\’t always replicate movements in the spot price of corn perfectly.
Investors outside the U.S. have more options for corn exposure through ETFs; ETF Securities offers both inverse and leveraged corn options in addition to the traditional long corn fund.
What are Corn Futures?
Corn futures are among the most widely traded agricultural contracts, with an average daily volume of several billion dollars. Corn futures are traded on the Chicago Mercantile Exchange, and the deliverable grade is #2 Yellow. #1 Yellow is also deliverable at a 1.5 cent/bushel premium and #3 Yellow at a 1.5 cent/bushel discount.
Corn futures contracts are for 5,000 bushels, which translates into roughly 127 metric tons. The contract is priced in cents per bushel, and contract months are March (H), May (K), July (N), September (U), and December (Z). Corn futures trade on the CME Globex platform under the symbol ZC and in open outcry trading under C.
How to Buy Corn Stocks
For some commodities, it is possible to gain indirect exposure to the resource through an investment in companies that are engaged in growing or producing the commodity. Because a significant portion of global corn output comes from small farmers or privately held companies, options for exposure via this strategy are limited.
There are, however, some options available. There are many agribusiness firms that provide products and services to farmers, and the profitability of these companies often shows a correlation to agricultural spot prices. Some of the largest agribusiness firms include Potash (POT), Monsanto (MON), and The Mosaic Company (MOS). These stocks are by no means pure play on corn, but present another option for investors looking to gain exposure.
Corn in the News
A Look at Commodities in the First Half of 2014
The Next Big Industry: Farming Technology
February Contango Report: Precious Metals and Softs
Monsanto Q1 Earnings Are In: Profits Climb
Contango Report: Precious Metals Sloping Up for 2014
Checking in on the Best Commodities of 2012
The 5 Worst Commodities of 2013
Commodity Earnings Recap: ADM, MRO, DVN
The Hidden Cause of Rising Gas Prices
U.S. Heatwave Draws Comparisons to 2012