Four ETFs To Play Corn's Rise

NEW YORK (TheStreet) -- As supply and demand imbalances continue to push the prices of corn and other agricultural products higher, the path to prosperity could potentially be paved for the Teucrium Corn(CORN), the PowerShares DB Agriculture Fund (DBA), the PowerShares Global Agriculture(PAGG) and the Market Vectors Agribusiness(MOO).

Recently, the U.S. Department of Agriculture released a report illustrating that corn yields are lower than expected resulting in downward revisions to future crop estimates, pushing prices of the sought after commodity north of $5 a barrel. In fact, the USDA projects that in 2011 supplies as a percentage of usage would be at their lowest levels in 15 years. Furthermore, grains were hit by a supply shock earlier this year by the severe drought seen in Russia.

Ian Berry of the Wall Street Journal indicates that some causes of this lower yield include heavy rains and flooding in parts of the Midwest earlier this year which washed away nitrogen, a key nutrient in corn production. Additionally, unseasonably hot-night temperatures plagued the region resulting in crops to become stressed limiting kernel growth.

Corn is such an important commodity because of its uses in packaged foods and its importance in livestock production. Corn is often used by farmers and ranchers to fatten up their herds of cattle and chicken to produce more meats, eggs and milk. Additionally, corn is a staple ingredient in the production of ethanol, which is a source of fuel that continues to grow in global demand.

On the demand side, global demand for corn is expected to remain elevated in the near future. For the first time in several years, China has emerged as a consistent buyer of U.S. corn and is likely to extend out this trend. In addition to China, other developing nations are likely to demand more corn as per-capita income in these regions increases and populations continue to grow. Demand from the energy sector is also expected to increase as ethanol margins remain favorable and the push to cleaner global energy standards continues to remain on the political agenda.

• Teucrium Corn is a pure play on corn through futures contracts
• PowerShares DB Agriculture Fund is a diversified play on agriculture and allocates nearly 12.79% to corn futures contracts
• PowerShares Global Agriculture, which includes companies likely to benefit from positive price support seen in corn such as Monsanto(MON) and Wilmar International
• Market Vectors Agribusiness, which includes companies like Potash(POT), which produces and sells fertilizers and related industrial and feed products worldwide, and Deere(DE), which provides products and services for agriculture in its top holdings, both of which are likely to reap the benefits of corn's rally

Written by Kevin Grewal in Houston of SmartStops.net.

Grewal was long DBA at the time of publication.

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