Teucrium Sugar Fund (NYSEARCA:CANE)
Sugar is another product which should see a spike in prices aided by flat demand and declining production as per the Rabobank. Millers in Brazil, the world’s biggest sugar producer will produce more ethanol – which will be made of sugarcane – next year, thus keeping a lid on sugar supplies. More Ethanol production is necessary in Brazil to combat rising gasoline prices and use ethanol as an alternative fuel.
This sweet commodity had fallen out of favor in 2013 thanks to a record harvest from Brazil and a surplus in other key countries, but it might be an intriguing option for investors seeking to cash in on the favorable demand-supply dynamics in 2014. CANE better serves this purpose in the space, and we have highlighted some of the key stats on this fund below:
CANE in Focus
CANE provides investors direct exposure to sugar without the need for a futures account. The product seeks to alleviate the impact of contango and backwardation. The ETF uses three futures contracts for sugar, all of which are traded on the ICE Futures exchange.
The three contracts include the second-to-expire contract, weighted 35%, the third-to-expire contract, weighted 30%, and the contract expiring in the March following the expiration month of the third-to-expire contract weighted 35%.
The fund has amassed just $2.4 million in its asset base and is less liquid with a very small daily trading volume. The product is the high cost choice in the space as it charges a fee of 162 bps per year. Further, a wide bid/ask spread increases the cost of investment to those looking for a quick trade.
Though CANE was down 6.49% in the last three-month period, investors should note that the rate of loss was quite lower than the gigantic losses it incurred in early 2013. The fund currently holds a Zacks ETF Rank #2 (Buy).
Pure Beta Livestock ETN (NYSEARCA:LSTK)
This field of investing has been affected heavily by a nationwide drought that sent cattle to market sooner than normal in 2012 resulting in a short-term surge in supplies. The space saw a price rise in 2013 due to higher corn prices and low production.
Going into 2014, though the production outlook is improving, it is yet to hit the pre-crisis level thus still having something in store for investors. USDA raised cattle prices for 2014 in its December report from November as demand for fed cattle remains strong. Strong demand and still-tight supply will likely lead the space.
LSTK in Focus
The underlying index of this ETN gives exposure in two futures contracts on livestock commodities. It invests about 62.4% in live cattle and 37.6% in lean hogs. It charges an expense ratio of 75 bps a year. The product was up 2.06% in the last three months. LSTK currently carries a Zacks ETF Rank #3 (Hold).
This article is brought to you courtesy of Eric Dutram.