As we move into springtime, Teucrium’s managing director and senior portfolio strategist, Jake Hanley, takes a look at some of the main factors affecting agricultural commodities – and what the next quarter might hold.
Teucrium, based in Burlington, Vermont, started up in 2010. It specialises in agricultural commodity ETFs, providing investors and advisers with exposure to futures for corn, wheat, soya beans and sugar. To date it has launched eight ETFs and assets under management totalled USD288.8 million as at 1 March.
Hanley joined Teucrium in 2018, initially as director of operations, sales and marketing. Some of his previous roles included financial adviser at the People’s United Bank (now M&T Bank) and assistant vice president at Merrill Lynch.
Assessing the outlook for corn, wheat and soya beans, he says: “Our base case for 2024 is that prices are going to experience headwinds and will trend lower until they stabilise: we think we’re probably close to that point of stabilisation now. The reason for this view is that production has caught up with demand. A big market focus presently is South America – particularly Brazil, for soya beans and corn. Brazil is currently the single largest exporter of corn and soya beans – it has surpassed the US.
“There were concerns that El Niño-related drought would cause some problems with soya beans and corn, but Brazil has planted many acres, and that supply is now coming through. They’re harvesting soya beans and planting their second corn crop. So, South America looks like it’s going to do OK.
“In the US, we have some tractors rolling in Texas right now. It’s very early, but some planting is getting started. As we move through March and April, the focus will turn to weather and planting conditions in the US. If weather cooperates − and as we don’t know what the weather is going to do, we take the base case that it’s going to be fine − we should see record production in the US again.”
Reflecting on the main disruptors that could emerge, he explains: “There’s a risk that La Niña develops again in the summer and autumn, which could wreak havoc on our production this year and next year. That would be a big problem.”
He adds: “And then there’s the gyrations of international trade and geopolitics: these can upset the apple cart in a big way. If you had to point to the one thing that’s the prime mover and driving force behind everything in this sector, it’s international trade relations and geopolitical strain.”
While Teucrium is not looking to launch any new ETFs imminently, Hanley reports that it has recently branched out in a different direction. He says: “Seven of our eight funds are involved in agriculture, but we do also have a base-metals strategy ETF which was launched last year: the fund is up by 8.65 per cent year to date.”
He concludes: “Our focus is to broaden awareness of the fact that we’re not just an agriculture ‘shop’”.
