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NYSE Ticker: CORN
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Corn – Largest Grain
Largest of all U.S. Agricultural Commodities
Uses include: Animal Feed, Ethanol Production,
Human Consumption, Polymer Production
88 million US acres planted in 2010/11 crop
year; 81 million harvestable at 163.5 bu/acre
1 bushel of corn equals 56 pounds
U.S. demand: 28 million bushels/day in 2008/09
World demand: 84 million bushels/day in
2008/09
World demand (est.): 89.6 million bu/day in
2010/11
04/10/23 14:45
Sources: National Agricultural Statistics Service Crop Production Summary Jan 12, 2009USDA World Agricultural Supply and Demand Estimates July 9, 2010US Foreign Agricultural ServicesSpectrumcommodities.com
Corn – Everywhere In The World Economy
Primary global use: livestock feed.
Second largest global use: US ethanol
production.
Human consumption: mainly
sweeteners and direct use of corn
kernel.
Increasing use as a polymer feedstock
for production of plastic; Wal-Mart
switched to corn-based plastic bags in
2007.
Of the 10,000 items in a typical grocery
store, at least 2,500 items use corn in
some form during production or
processing.
04/10/23 14:45Sources: US Grains CouncilUSDA Feed Grains Database: YearbookSmithsonian.com Aug 2006Ontario Corn Producers Assoc
Corn – Demand Rising with Population & Prosperity
Rising world population is
decreasing amount of arable land
for crops, but also brings increased
demand for corn and corn products.
As incomes in developing countries
rise, consumers tend to diversify
their diets – increasing the relative
consumption of meat (protein),
dairy products and processed foods
– all of which increases corn
demand.
Economic growth in developing
countries is projected to average
more than 5.6% annually during the
period 2010-19
04/10/23 14:45
Corn – Global Demand Rising Steadily
04/10/23 14:45
Source: USDA.gov July 9, 2010
Global Corn Consumption 2006-2010In Thousand metric Tons
Corn – The Ethanol Story
Ethanol has permanently replaced
MTBE as the primary oxygenate in the
US gasoline pool.
The average ethanol content in the
137 billion gallon US gasoline pool is
8.9%
USDA projects 13 billion gallons of
ethanol will be produced in 2010 from
4.5 billion bushels of corn.
1 bushel of corn = 2.8 gallons of
ethanol
In California, the average SUV uses
about 1 bushel of corn in each tank of
gasoline.
04/10/23 14:45Source: USDA.gov/oce/forum/2010Houston Biofuels Consultants
Corn – The Ethanol Story
04/10/23 14:45
Corn – The China Factor
The Chinese population is projected
to grow by 6.6 million people in
2010.
China became a net importer of
corn in the 2009/10 crop year.
China could import up to 1.7 million
metric tons of corn in the 2010/11
crop year.
According to some analysts, China
could import up to 15 million metric
tons of corn by 2014/15
1 million metric tons = 39,368,000
bushels
04/10/23 14:45
Sources: CIA FactbookUSDA Foreign Agricultural ServiceBloomberg Business Week: China Enters ‘New Era of Buying Corn July 26, 2010
Corn, China & Energy – “déjà vu all over again”
In 2004, Chinese net oil imports
rose sharply – 38%
From 2003 to 2004, Chinese net
oil Imports rose 700,000 barrels
per day
Impacted world oil supply and
price
In 2008, Chinese net corn
imports rose sharply - 400%
Proteins are becoming an
increasingly larger part of the
diet in China as incomes rise and
urbanization continues
Corn, China & Energy – “déjà vu all over again”
04/10/23 14:45
Waiting for data price of corn vs price of oil
Supply Uncertainty – Inelastic Demand
For the period 2006 to 2010, the USDA estimates that 99% of all corn grown each year will be consumed, leaving virtually no excess inventory to meet worldwide demand.
The USDA estimate for the 2010/11 corn “carry-out” (excess inventory) in the U.S. is for only 37 days of supply.
Farmers must produce 100% of global demand every year just to maintain already low inventories.
04/10/23 14:45Source: USDA Foreign Agricultural ServiceUSDA World Agricultural Demand and Supply Estimate
Supply Uncertainty – Not Just Bible Stories
Floods, Drought, Disease, Pestilence all directly affect crop output every crop year.
Corn production can be more vulnerable than Sugar, Wheat or Soybeans Corn production is concentrated
in the Northern Hemisphere with only one crop cycle each calendar year.
Unexpected shortages can cause major price increases lasting one or more crop years. 04/10/23 14:45Sal – why are other products more
vulnerable?
Supply Uncertainty – Not Just Bible Stories
04/10/23 14:45
Supply Uncertainty: Northern Hemisphere = Corn
04/10/23 14:45
Supply Uncertainty: What A Difference a Month Makes...
04/10/23 14:45
Supply Uncertainty – US Inventory
04/10/23 14:45
Supply Uncertainty – US Inventory & Prices
04/10/23 14:45
Monthly Corn Futures
04/10/23 14:45What is the source?
Crop History – Drought Happens
04/10/23 14:45
2002 Midwest Drought
Source:National Corn Growers Assoc
Yield: A Question of Weather
1980: Drought
1983: Hot Summer
1988: Drought
1993: Floods
1996: Floods
2002: Drought
Every Three to Five Years
04/10/23 14:45Source: ??
04/10/23 14:45Source:??? US or global
Wheat Monthly Returns
04/10/23 14:45What is the source?
04/10/23 14:45What is the source?
Corn – Emerging Market and BRIC Play Industrial Metals ETFs being
used as proxy for autos and other consumer goods
Corn can be used as a proxy for the developing world - as income grows, diet diversification and protein consumption grows – often before other consumable goods.
Corn can be used as a proxy for arable land and water - both of which are issues in the developing world.
04/10/23 14:45
Asset Allocation and Ags
Oppenheimer Funds Commodity Strategy Total Return Fund – 10% in all Ags
Deutsche Bank Agriculture (DBA) – 12.5% in corn Deutsche Bank Commodity (DBC) – 5.3% in corn Rogers International Commodity Index (RICI) –
4.8% in corn Rogers International Commodity Index Agriculture
(RICIA) – 13.6% in corn iPath DowJones-UBS Agriculture Subindex Total
Return ETN (JJA) – 23.1% corn iPath DowJones-UBS Grains Subindex Total Return
ETN (JJG) – 35.9 % corn04/10/23 14:45
CORN and How it Works
CORN is designed to provide
investors with a vehicle that
allows direct exposure to
corn without having to open
a futures account
CORN allows investors
direct exposure to the
world’s largest most
important agricultural
commodity in an NYSE
stock.
The U.S. corn futures pit
averages approximately $4
billion per day on the CME
04/10/23 14:45Source: CBOT Exchange ADV Monthly report published by CME group (Jan 2009 to May 2010)
CORN and How it Works: Liquidity The approximately $4 billion of
corn futures traded every day in the U.S. corn pits dictate the liquidity of CORN - not the shares outstanding or the average daily volume.
Market makers will create more shares each day to accommodate any size/liquidity needs of investors based on the corn futures pits
Active commodity/agricultural traders can take advantage of CORN’s daily price volatility
CORN is designed to mirror the volatility of corn futures and is often more volatile than that of other commodity/agricultural exchange traded securities
04/10/23 14:45
CORN: Volatility
04/10/23 14:45Source: Teucrium Corn Fund
CORN and How it Works: Intraday Indicative Value (IIV)
SEC requires that all exchange traded products make available the IIV of the securities’ share price so that Investors have transparency, similar to that of professional market-makers
The IIV is calculated and updated every 15 seconds throughout the trading day based upon the value of the underlying holdings in a exchange traded product’s portfolio.
The IIV is independently calculated and disseminated by the listing exchange - in the case of the CORN the IIV is calculated by the NYSE.
The IIV for Teucrium Corn Fun can be found at: http://finance.yahoo.com/^corn-iv
04/10/23 14:45
Teucrium Trading LLC – the Commodity Experts
Every commodity has important seasonal and structural differences - requires specialized skills and knowledge.
Teucrium’s principals are commodities experts with commodities industry experience.
Teucrium’s products are designed around the specific commodity: CORN.
Seasonality, Liquidity, Structural Trading Mechanisms and Patterns are well understood by the Teucrium team and incorporated into our products.
04/10/23 14:45
Teucrium Trading LLC - Designing Product Specific Benchmarks
CORN has been specifically designed to mitigate contango and backwardation issues versus other commodity exchange traded securities
CORN’s Benchmark is composed of three different futures contracts, reducing turnover and minimizing negative effects of “rolling.”
Unlike other commodity exchange traded products and indices - CORN holds no spot month futures.
CORN uses December as the “Anchor” month in its Benchmark.
CORN provides investors with an investment tool allowing precise allocation to corn, the largest U.S. agricultural commodity, in their portfolios.
CORN allows investors to hedge their corn exposure in other mixed-commodity holdings by increasing or decreasing their amount of corn exposure.
04/10/23 14:45
CORN Tracking vs Benchmark After 1 Month
GRAPH
Can we produce? Does kelly have this?
04/10/23 14:45
Tracking vs Spot Corn
04/10/23 14:45Source???
Tracking vs Corn Curve – Providing Exposure to the Underlying Commodity not just Spot
04/10/23 14:45From prospectus?
Seasonality/Liquidity/Forward Curve/OTC
04/10/23 14:45
Do we need?
Certainty of Supply in Energies/Metals Quantity of ore is fairly
certain Mine
production/output - a known quantity each
quarter. Developing newly
found oil deposits is an expensive and lengthy process – allows investors time to digest the news.
There is large stored supply of metals and energies making them less volatile then Ags.
04/10/23 14:45Source:geology.com
CORN Volatility vs Other AG ETFS
CORN is designed to mirror the volatility
of corn futures.
Other AG ETFS hold a basket of
commodities and thus are not as volatile
as CORN
For example on June 30 CORN gained
8.17% on news that 1 million fewer
acres had been platted then expected,
DBA moved only 1.6% as corn is only
6.62% of the fund.04/10/23 14:45
Do we need?
04/10/23 14:45
