Commodity ETF Alert September 2013 Portfolio Update

| September 24, 2013



As you know, I sent out an email alert on September 10th, recommending subscribers buy the Teucrium Corn Fund (CORN).

Here’s some additional insight into why we made this trade, and how it’s performing thus far…


It’s official…

The 2013 corn harvest season is underway.  Farmers across the US are in various stages of completing their yearly task of supplying the world’s corn.

In the Southeastern US, corn yields are coming in strong.  In fact, Georgia, South Carolina, and North Carolina are expected to have their strongest crop in years.

These strong early harvest yields have the USDA putting forth a very rosy outlook for this year’s US corn crop.

In their most recent World Agriculture Supply and Demand Estimate (WASDE), the government agency raised their 2013 corn yield estimate to 155.3 bushels per acre (bpa).  That’s up slightly from the 154.4 bpa estimated in the August WASDE report.

Of course, when yield estimates rise, prices fall.

Take a look…

CORN Chart

As you can see from this 3-month chart, corn remains under bearish pressure.  The December corn contract currently trades near $4.50 a bushel- the lowest price since mid-2010.

But here’s the deal…

Ag experts seriously doubt the viability of the USDA’s rosy corn outlook.

In fact, analysts at highly respected crop forecasting agency, Lanworth, have the 2013 corn yield estimate pegged at 152.9 BPA.  That’s well below the USDA’s current 155.3 projection.

And they’re not the only ones doubting the USDA…

A handful of institutional commodity trading organizations question the government agency’s optimistic view as well.  In fact, Commerzbank, Societe Generale, and Morgan Stanley all agree corn will soon be back above $5 a bushel.

Even fertilizer giant PotashCorp is forecasting a smaller US corn crop than the USDA is anticipating.  Hot and dry conditions in parts of the Midwestern US in late August and early September hurt soil moisture levels, which will ultimately bring yields lower.

Here’s the bottom line…

Corn prices have been decimated in 2013 thanks to the USDA’s highly optimistic view. But as you can see, plenty of experts (myself included) disagree with the government agency.

We may see a few more weeks of lingering corn prices, but once investors get a better read on final corn yields, we’ll likely see a rally for corn.

If you haven’t already, go ahead and buy the Teucrium Corn Fund (CORN) at any price below $36.00.

Now let’s take a look at other major commodities, along with an update on our open portfolio positions…



Energy JJE $17.37 $17.16    +1.2%
Grains JJG $46.09 $44.74    +3.0%
Industrial Metals JJM $29.22 $30.08    -2.9%
Precious Metals JJP $67.70 $67.08    +0.9%
Softs JJS $46.40 $44.22    -3.8%
Livestock COW $27.46 $27.30    +0.6%
All Commodities DJP $37.33 $37.27    +0.2%



Things are about to get very interesting in the oil market!  After months of unnecessary high prices, this market finally looks like it’s ready to come to its senses. The Syrian situation is cooling down, the US summer driving season is over, and supply disruptions in Libya are easing.

And that’s not all…

US crude oil inventories came in at 355 million barrels in last week’s EIA report.  That puts US supplies smack dab in the middle of their five-year average range for this time of year.

What’s it all mean?

Oil is poised for a major downward correction in the not-so-distant future.  Keep holding your position in the United States Short Oil Fund (DNO).  Once bullish investors decide to exit this market, the price of oil will come down very quickly!  Of course, such a situation will send DNO rocketing higher.

As far as natural gas goes…

Above average September temperatures have kept a bid under the price of this gaseous commodity.  In fact, spot gas ran to a multi-month high of $3.80 mmbtu after last Thursday’s EIA inventory report.

But here’s the deal…

We may see natural gas prices weaken slightly in early October as investors factor in a return to average temperatures.  But once November arrives, we’ll likely see bulls return to this market with a vengeance.

As a result, be patient and keep holding our position in US 12-month Natural Gas (UNL).  The heart of the bullish gas season is right around the corner.


Grains remained under pressure in recent trading as investors kept a close eye on recent USDA yield estimates and Farm Service Agency (FSA) data.  The USDA is still pushing the idea that corn, soybean, and wheat stocks will be plentiful this Fall.

However, like I said earlier in today’s report- a growing consensus of analysts is wary of the USDA’s optimistic view.


Copper is still having a tough time breaking through the $3.35 a pound level.  The red metal tested this important technical area many times in August, and just did so again last Thursday.

Take a look…

Copper Chart
Will the metal ultimately break above this important price ceiling?

China PMI data is set for release this coming Sunday.  We’ll need this important data reading to come in strong in order for copper to maintain its bullish posture.

We’re currently sitting on gains of 7% in the iPath DJ-UBS Copper (JJC).  Let’s keep holding this ETF for higher prices.


Precious metals are all over the map…

Contradicting comments from Fed Chairman Ben Bernanke and St. Louis Fed Bank President James Bullard, sent gold, silver, platinum, and palladium on an absolute roller coaster ride last week.

It all started when Bernanke announced the Fed’s tapering plans will be delayed for the foreseeable future.  This unexpected bullish news sent precious metals soaring last Wednesday.

But then Bullard stepped into the fray…

In a Bloomberg interview less the 48 hours after Bernanke’s announcement, he proudly proclaimed the Fed will likely taper in October.

The contradicting comments sent panic and confusion through the metals complex.

As you know, we’re holding open positions in Platinum (PGM) and Palladium (PALL). Both these metals succumbed to selling pressure late last week thanks to conflicting tapering ideas from the Fed.

Where do they go from here?

I’ve said it many times over the past few months- supply/demand fundamentals for platinum and palladium are undeniably bullish.

BBut until investors can start focusing on those bullish factors, and not this ridiculous Fed bantering, we’ll likely see continued choppy and volatile range bound trade for these metals.

As a result, I’m moving both PGM and PALL to a hold until further notice…


Cocoa and sugar have been the strongest performing soft commodities in recent trading.  Cocoa ran higher thanks to better than expected US grinding data and newfound South African crop uncertainty.

The price of sugar is gaining traction thanks to the US Government’s attempt to keep struggling US producers from defaulting on loans.  In fact, the USDA recently purchased 7,118 tons of beet sugar in late August and immediately sold it to an ethanol producer.

But get a load of this…

The USDA lost $2.7 million on the deal.  Isn’t it nice to know our taxes are being put to such good use?!

I digress…

The USDA’s goal is to bring US sugar supplies lower, which will help prop up prices. Higher sugar prices will allow US producers to sell their crops at a profit, which will ultimately allow them to repay $298 million in outstanding government loans.

As you can see, this is blatant manipulation of the sugar market.  Chasing sugar prices is not a good idea at this point.


With the summer grilling season coming to an end, there’s a likelihood that cattle prices will finally take a breather.

However, this summer’s strong feeder cattle price gains came from growing consumer beef demand.  But more importantly, weak placements of cattle into feedyards kept prices on an upward slope.

August feeder placements came in at the lowest level since 1996.  That means US cattle numbers are still incredibly tight.


Category: Commodity Trading