Even casual participants in the financial markets know that it
has been nearly impossible to go a single trading day over the past
several weeks without hearing about corn. Google Trends shows
search volume for the word "corn" is spiking
The surge in Internet searches on the agricultural commodity
corresponds with a breathtaking
jump in corn futures
. Along those lines, it is safe to say that investors who had not
heard of the Teucrium Corn Fund (NYSE:
) two or three weeks ago, at the very least, now know that CORN
While the vegetable that is an ingredient in scores of products
soars, another commodity's futures have suffered -- cotton. The
fabric of our lives is being
held hostage by the worst scenario for any
- slack demand and rising stockpiles.
In fairness, it should be noted the iPath DJ-UBS Cotton TR
Sub-Index ETN (NYSE:
) is higher over the past month. The less popular iPath Pure Beta
Cotton ETN (NYSE:
) has absorbed a manageable loss of half a percent over the same
The fact that cotton futures
could rally because of an oversold condition
cannot be ignored. That is a potential near-term catalyst that does
not solve the longer range problem of a slowing global economy.
The economy is fragile here in the U.S. and slowing in China.
The Eurozone is a well-documented disaster. These factors help
explain why cotton futures have plunged nearly 30 percent in the
past year. BAL and CTNN's declines have been only marginally better
at 21 percent and 25 percent, respectively.
BAL and CTNN could see some relief if farmers move away from
cotton to plant more corn, soybeans, and wheat. In addition to
CORN, the Teucrium Soybean Fund (NYSE: ) and the Teucrium Wheat
Fund (NYSE: ) have set torrid paces in the past month. If farmers
shift to those commodities, cotton supplies would decrease, but
that would only solve one part of the problem for BAL and CTNN.
The other issue is pensive global consumers. Prudent personal
finance dictates that one who is worried about his or her
employment situation and how to pay the next car or electric bill
should not be devoting after-tax income to sprees at the local
Abercrombie & Fitch (NYSE: ).
Ultimately, in order for BAL to really bounce, worldwide
consumers need to start making new wardrobe additions. Cotton
futures are notoriously volatile and that volatility has trickled
down to BAL, which is to say that if there is a good reason for
this ETN to move higher, it will. Highlighting BAL's penchant for
volatility is the fact that 16 months ago, the ETN traded over
$110. It now resides below $48.
The bear case is without the benefit of more quantitative easing
and with the specter of a slowing global economy, BAL likely has
more downside ahead of it.
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.