Commodities have had a rough ride over the past year, as a
strong dollar has dulled the potential of many natural resources.
However, we have also seen some solid performances out of a few
commodities in the time frame as well.
In particular, ETF investors have seen some solid trading in
Teucrium Corn ETF (
. This ETF remains the only pure play fund to target corn, and is
thus a great proxy for the commodity's performance.
Thanks to a big drought in 2012 and fears over a global food
crunch, CORN was a top performer in the latter half of 2012,
adding over 25% in the time frame. While the bulk of the gains
came in June and July of the time period, CORN managed to hold
firm for the rest of the year and stay at an elevated level.
Lately, however, the trend has been far different with shares
of CORN slumping. In fact, the commodity ETF is now down over 8%
in the past five days, while the dollar ETF
is flat, so clearly it isn't really dollar strength that is the
issue for this commodity as of late (read
Should You Avoid These Agricultural ETFs in
What's Driving CORN?
Instead, the focus in the corn market has been on the
inventory report and the resulting bearishness in the space.
as of March 1
, according to the USDA via Bloomberg, hit 5.399 billion bushels,
well above the 4.995 billion that analysts were expecting.
Furthermore, the report showed that plantings will also surge,
up from 97.155 million acres to 97.282 million acres this year.
This level represents the most acreage in three quarters of
a century, adding to the bearish tone hanging over the corn
Unsurprisingly, this shockingly bad report was ill-received by
traders in the grain pits, as they pushed corn futures down to
their limit before the long-weekend. This also led the CORN ETF
to a huge loss, a situation that continued into Monday trading as
well, leaving the fund with a nearly 8% loss in two days (read
Time to Sell This Commodity ETF?
While this is certainly unfortunate it shouldn't have been
completely unexpected. We currently have a Zacks ETF Rank of 5 or
'Strong Sell' on the fund, along with similarly bearish figures
for many of the other agricultural commodity focused
, suggesting that the entire space is probably an avoid.
Better Commodity Plays
This bearish report doesn't bode well for the agricultural
sector going forward, suggesting that low Zacks ETF Ranks may be
in store for this segment for quite some time. After all, with
such a massive corn crop on the horizon, demand for other
products like wheat or soybeans will likely be curtailed, hurting
the prospects of ETFs following these commodities as well (see
the Zacks ETF Rank Guide
So, for the time being if investors want to make a play on the
commodity space, a look to other segments might be necessary.
Currently, we have solid Zacks ETF Ranks on a few commodities in
the precious metals market such as
, all of which have Zacks ETF Ranks of 2 or better.
Given the current economic environment and the extra
bearishness surrounding the agricultural market, it could be time
to look to these commodities instead for exposure. Not only do
they possess better Zacks ETF Ranks, but the general outlook is
far better, especially given the latest news out of the USDA on
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TEUCRM-CORN FD (CORN): ETF Research Reports
ETFS-PALLADIUM (PALL): ETF Research Reports
ETFS-PLATINUM (PPLT): ETF Research Reports
ISHARS-SLVR TR (SLV): ETF Research Reports
PWRSH-DB US$ BU (UUP): ETF Research Reports
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