Trading Corn In 2021: 4 Reasons To Consider Corn


How and Where to Trade Corn
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In this guide to trading corn, we’ll explain how and where you can trade this popular commodity with a list regulated brokers that are available in your country.

In a hurry? If you want to get started trading corn and other commodities here are brokers available in to consider:

Disclaimer: Availability subject to regulations.
Between 53.00%-89.00% of retail investor accounts lose money when trading CFDs.

How Can I Trade in Corn?

Traders have several ways to speculate on the price of corn:

Method of InvestingComplexity Rating (1 = easy, 5 = hard)Storage Costs?Security Costs?Expiration Dates?Mgmt Costs?Leverage?Regulated Exchange?
Corn Futures5
Corn Options5
Corn ETFs (ETNs)2
Corn Shares2
Corn CFDs3

Corn Futures

The Chicago Mercantile Exchange (CME) offers a contract on corn that settles into 5,000 bushels or about 127 metric tons of #2 yellow corn. Traders can also deliver #1 yellow corn at a 1.5 cent per bushel premium or #3 yellow corn at a 1.5 cent per bushel discount.

The contract trades globally on the CME Globex electronic trading platform and has expiration months of March, May, July, September and December.

Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, the contracts are physically settled by delivery of corn.

Trading in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.

Corn Options on Futures

The CME offers an options contract on corn futures.

Options are also a derivative instrument that employ leverage to trade in commodities. As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.

Options buyers pay a price known as a premium to purchase contracts. An options bet succeeds only if the price of corn futures rises above the strike price by an amount greater than the premium paid for the contract.

Therefore, options traders must be right about the size and timing of the move in corn futures to profit from their trades.

Corn ETFs

These financial instruments trade as shares on exchanges in the same way that stocks do. Only one ETF – Teucrium Corn Fund – offers a pure play trade in corn. The fund invests in corn futures contracts.

Other ETFs, such as PowerShares DB Agriculture Fund and UBS ETRACS CMCI Agriculture Total Return ETN, invest in corn along with many other agricultural commodities.

Teucrium Corn FundPowerShares DB Agriculture FundUBS ETRACS CMCI Agriculture Total Return ETN

Shares of Corn Companies

There are no public companies that are a pure-play investment in corn. However, traders that want exposure to corn prices may want to consider buying shares in large agribusinesses that provide seeds, fertilizers and pesticides to farmers:

CompanyDescriptionExchangeFoundedInteresting Fact
Monsanto
Global agricultural company that provides seeds, genomic and other products to farmers.New York (NYSE)1901In 1983, Monsanto was one of four organizations who introduced genes to plants.
The Mosaic CompanyGlobal agricultural company that sells crop nutrients to farmers.New York (NYSE)2004Mosaic is the United States' largest producer of phosphate fertilizer and potash.
Nutrien
Nutrien Ltd Logo
Global agricultural company that sells fertilizer and feed products.New York (NYSE)1975Nutrien was formed in January 2018 after the Potash Corporation of Saskatchewan and Agrium merged.

Contracts for Difference (CFDs)

One way to trade in corn is through the use of a contract for difference (CFD) derivative instrument. CFDs allow traders to speculate on the price of corn without owning the underlying asset. The value of a CFD is the difference between the price of corn at the time of purchase and its current price.

Many regulated brokers worldwide offer CFDs on corn. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that traders can have exposure to corn prices without having to purchase shares, ETFs, futures or options.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

Where Can I Trade Corn?

Start your research with reviews of these regulated brokers available in .

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 53.00%-83.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Reasons to Trade Corn

Traders speculate on the price of corn for a variety of reasons, but the following are most common:

  1. Bet on Ethanol Demand
  2. Bet on Chinese Demand
  3. Inflation Hedge
  4. Portfolio Diversification

Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.

Betting on Ethanol Demand

Consumption of biofuels including ethanol is likely to grow in the years ahead, and trading in corn is a way to benefit from this trend.

Over 60 countries, including the European Union nations, have ethanol targets or mandates in place, and this number is expected to grow as more countries seek cleaner energy sources.

Speculating on Chinese Demand

Chinese demand for corn is likely to grow for many reasons including:

  • China has targets in place to increase biofuel consumption in the years ahead.
  • The country has over a billion people that it needs to feed.
  • China’s growing wealth may lead to more meat consumption and greater demand for livestock feed.

How Does Corn Act as an Inflation Hedge?

Trading in corn is one way to protect yourself against inflation. Agricultural commodities, including corn, are certain to become more expensive if world economies experience bouts of inflation.

Overly accommodative monetary policies from the world’s largest central banks have kept global interest rates low and have created speculation in many different asset classes.

At some point, this speculation could show up in commodity markets, and corn prices could soar. A weak dollar, in particular, could create inflation and lead to higher corn prices.

Diversify Your Portfolio 

Most traders are overly concentrated in stocks and bonds. Trading in corn provides traders with a diversification of risk in their portfolios.

Risks of Trading in Corn

However, traders should also consider the risks of trading in corn.

  1. An emerging market slowdown could seriously limit demand for corn.
  2. Advancements in green energy sources, such as solar, hydroelectric and wind power, could reduce demand for biofuels.
  3. Heavy subsidization could lead to overproduction of corn.

Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.

Corn Experts

What Do Experts Think About Corn?

Experts see reasons for both optimism and pessimism about corn prices in the future. On the one hand, there is a massive supply of the commodity, which is creating a serious overhang on the market:

There’s too much harvest yet to come, too much corn being stored on the ground that will be pushed into the pipeline early rather than later.

– Matthew M. Pierce, director of commodity consulting, Futures International LLC

However, despite the oversupply, there may be reasons for optimism. Jason Ward, director of grains and energy at Northstar Commodity, believes corn prices have room to move lower as excess supply gets absorbed by the market. However, he sees a silver lining in the ethanol market:

… a lot of ethanol plants are in expansion mode. We need all of that because these corn yields, this year, are unbelievable.

– Jason Ward, director of grains and energy, Northstar Commodity

Further Reading

Plus500 is not available in the US

Legitimate CFD brokers, like Plus500, cannot accept US clients by law

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