Todd Shriber: Wow, even more breath-taking than silver’s (NYSE:SLV) ascent was the wicked decline investors were forced to endure last week as the CME Group, the operator of the exchange where silver trades in the U.S., used margin increase after margin increase to chase the volatility out of the silver (NYSE:ZSL) market. I’m not going to speculate as to why CME or any exchange operator raises margins. Nor am I going to try to surmise whether silver’s run (NYSE:AGQ) is over (my gut tells me silver is headed higher, but I could be wrong).
What am I going to do is engage in one the favorite pastimes of traders and that is to identify who or what is next, as in what’s the next silver? And when I say that, I mean it in a good way as in silver pre-margin-hike-carnage.
Fortunately, in the hunt for the next silver there is no dearth of options in the exchange traded products universe, but I keep coming back to one option: Corn. By now, you probably know that corn is used for much than Fourth of July barbecues. It’s used for livestock feed and, like it or not, ethanol. In fact, over a third of corn produced in the U.S. is used to make ethanol. Plenty of folks have been critical of the “food for fuel” policy, but put those personal feelings and put your trader’s cap on because corn is a backdoor way to play rising oil prices, too.
I’ll let the chart do the talking on this front.
Of course, there is more to the corn story than just U.S. ethanol output. There is a major emerging markets kicker at play. Earlier this month, Bloomberg News reported that China’s corn demand is expected to handily outpace domestic supply over the next decade. Looking at the next chart, that’s not surprising at all.
It’s not just China. Emerging middle classes in places like Brazil, India and others want to eat better food. That means more beef, pork and poultry and it takes lots of corn to feed all those chickens, cows and pigs.
As I’ve said previously, commodities are volatile, making ETFs and ETNs the preferred way for many investors to get exposure to this asset class, and corn is no exception. In fact, corn is one of the msost volatile commodities out there, but don’t fret because there is an ETF or ETN for you to get some corn exposure while suiting your individual investment style.
For the investor that wants to pass on the commodities market altogether and just play equities that are part of the corn growth story, take a look at the Market Vectors Agribusiness ETF (NYSE:MOO). The corn angle here is fertilizer producers and farm equipment companies such as Deere (NYSE:DE). Those wanting more corn exposure with the potential for gains with some other grains might want to look at the iPath Dow Jones-UBS Grains Subindex-TR ETN (NYSE:JJG). Corn accounts for almost 41% of JJG’s weight.
Those are just a couple of options for corn exposure. We have an even more compelling option in the ETF Profit Report portfolio right now, which I invite you to check out.
Todd Shriber is an ETF fanatic, a former hedge fund trader, and a journalist. Todd started his professional career with Bloomberg News, where he covered banks, energy and technology. After leaving Bloomberg, Todd became a trader at a California-based hedge fund where he specialized in trading financials, energy, basic materials, and ETFs.
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