Summary

  • Grains prices fell 3.81% in Q1
  • CBOT and KCBT wheat post marginal gains, while rice and soybean meal prices move higher
  • Double-digit percentage losses in corn and soybean oil
  • The planting season gets underway
  • Risk-off weighs on the sector, but the world needs food

Grains were in the crosshairs of the trade war between the US and China in 2018 and throughout most of 2019. The two sides signed a “phase one” agreement on January 15, which raised hopes that 2019 would be a better year for farmers in the US. China is the world’s most populous nation, while the US is the leading producer and exporter of corn and soybeans. However, the outbreak and spread of Coronavirus created perhaps the most significant risk-off event since the Great Depression in the US. Beginning in late February, markets across all asset classes declined precipitously, and grains were no exception. The grain markets feed the world, and we are heading into the season of peak uncertainty in the US in Q2. The path of least resistance for all agricultural markets is determined by the weather conditions in the leading growing areas. The virus was spreading through all nations around the world at the end of Q1, leaving sickness and death in its path. The grain sector of the commodities market posted a loss during the first quarter of 2020. However, people require nutrition, and the potential for higher prices will be a function of supplies that depend on workers to produce crops and favorable weather conditions in the northern hemisphere. At the same time, bottlenecks at ports in the southern hemisphere could create short-term supply problems around the globe. Inventories remain at elevated levels going into the 2020 crop year in the US and other countries, but the growing population of the world depends on bumper crops each year.

A composite of the grain sector was down by 2.89% in 2016. The overall sector dropped by 14.48% in 2015 after falling 12.18% in 2014. In 2017, the sector posted a 6.03% gain despite bumper crops. In 2018, the overall grain sector moved 3.63% higher. In 2019, the sector posted an 11.50% gain. In Q1, grains fell 3.81% making it the best performing sector of the commodities asset class so far in 2020.

There were abundant supplies of agricultural commodities in 2018 and 2019 to feed the world, and while trade issues weighed on prices, the grain sector posted gains during both years. In Q1, the global population rose by around 20 million, according to the S Census Bureau. In 2000, two decades ago, six billion people inhabited our planet. Today, the number has grown over 27% and continues to rise, making the demand side of the equation for food a continually expanding factor. Grains are essential food for people, and anything short of a bumper harvest around the world creates the potential of food shortages, and that danger rises each year. In 2020, the world will consume more food than it did in 2019, and less than it will require in 2021. Therefore, the demand side of the equation for the grain sector will continue to increase while supplies are a year-to-year affair. The weather is always the most critical factor when it comes to the path of least resistance for grain prices each year. The sector faced an atypical dynamic in international trade over the past two years. In 2020, it faces a global pandemic.

The United States is the world’s leading producer and exporter of corn and soybeans, and a significant exporter of wheat to areas all over the globe. Throughout the second half of 2018 and 2019, international trade had become the most significant issue facing agricultural markets. On the campaign trail, President Trump pledged to level the playing field and renegotiate trade agreements to create more reciprocity and fairness. The President prefers bilateral to multilateral trade agreements, and he began the process of renegotiating trade deals with partners around the world in 2018.

When it comes to the Chinese, the President slapped protectionist measures on China, and they retaliated with tariffs on US goods. Soybeans, corn, and other agricultural products were in the crosshairs of China when it comes to the trade issue. China typically purchases one-quarter of the U.S. soybean crop each year. Tariffs caused those purchases to cease as China turned to Brazil and other producing nations. In early December 2018, a meeting between President Trump and Xi created some optimism that the two sides could agree in the future when it comes to trade. In Q2 2019, President Trump became frustrated with the pace of negotiations and Chinese backtracking, and on May 10, he slapped new tariffs on Chinese goods. China retaliated on May 13, leading many grain prices to fall to lows. However, the excessive moisture that led to planting delays turned markets around. In Q3 2019, the US put additional tariffs on China, and more retaliation followed. In Q4, in a sign that both sides are looking for a way out of the tit-for-tat protectionism, the trade waters calmed. China and the US signed a “phase one” deal where the US rolled back some tariffs, and China agreed to purchase agricultural products from the US. In Q1, the outbreak of Coronavirus in China and the spread of the virus around the globe presented a unique and severe challenge. Not since the Spanish flu that killed over fifty million people in 1918-1920 has the world faced a pandemic with no vaccine or treatment on such a widespread scale. The impact of Coronavirus sent markets across all asset classes into a deflationary spiral. Governments and central banks around the world employed unprecedented amounts of monetary and fiscal stimulus to keep the global economy afloat while scientists and health professionals raced against the clock to save lives. The bull market in stocks was a victim of the virus that continued to spread infection and death around the world at the end of the first quarter of 2020.

As we head into Q2, the focus will be on the health and wellbeing of the citizens of the world. When the spread of the virus slows, and treatments and a vaccine become available, the world will need to pick up the pieces of an economic disaster not seen since the 1930s. When it comes to the grain markets, the weather conditions across the fertile plains of the US and other producing nations in the northern hemisphere will determine the path of prices. Time will tell if the virus impacts planting at the beginning of the spring season as many states in the US and countries around the world were still in lockdown.

The grain sector moved 3.63% higher in 2018, even though the dollar index rose by 4.26% that year. In 2019, the dollar index was 0.34%, with the grains up 11.50%. In Q1, the dollar index was 3.16% higher, and grain prices fell by 3.81%. The rising greenback makes U.S. exports less competitive in global markets, but the growing population and requirements for food continue to underpin prices. The rise in the dollar was a function of a flight to quality in Q1 as the global pandemic accelerated. The decline in grains was also a response to risk-off conditions in all markets.

CBOT and CBOT wheat, and rice and soybean meal posted gains in Q1. All other grain futures markets declined during the first three months of 2020.

The iPath Series B Bloomberg Grains Subindex Total Return ETN product (JJG) moves higher and lower with grain prices. Since most of these commodities are all in contango, meaning that deferred prices are higher than nearby prices, when the market does not move, the ETN loses value as it rolls nearby futures to the next active month.

Corn

Corn was down just 0.36% in 2017. Corn dropped 9.63% in 2015 and 1.88% in 2016 and has been in a bear market since it traded to its all-time high at $8.4375 per bushel in 2012. Corn moved 6.91% higher in 2018 and was 3.40% higher in 2019. In Q1, the price of corn futures fell 12.12%. On March 31, continuous contract corn futures were trading at $3.3.4075 per bushel.

Source: CQG

Corn traded in a range of $3.3200 to $3.9875 in Q1. On the daily chart, price momentum in the corn market was in the upper region of oversold territory at the end of Q1, and relative strength was well below a neutral reading. Daily historical volatility was at 20.62%, higher than at the end of 2019.

Source: CQG

As the weekly chart illustrates, technical resistance is around the $4.00 per bushel level, with support at $3.2975. At the end of Q1, the price of corn was closer to the bottom end of the range as we head into Q2. Price momentum on the weekly chart was trending lower, and on the monthly chart, it was sitting below a neutral condition.

Source: CQG

As the quarterly chart highlights, corn has been making higher lows since July 2000, except for a marginal new low down to $3.01 in early 2016, but price action rejected that low. In Q1 2020, the impact of Coronavirus weighed on the price of the grain as energy prices plunged.

In 2012, drought pushed the price of corn to an all-time high. In 2013, the corn crop created a surplus, and from 2014 through 2019, we have seen more of the same. Open interest in CBOT corn futures was at the 1.389 million contract level at the end of the first quarter, 84,000 contracts lower than it was at the end of Q4 2019. In early June 2018, the metric rose to a new record high at around 2.0 million contracts.

Meanwhile, crude oil prices tanked in Q1 on a combination of demand destruction caused by Coronavirus and a decision by OPEC and Russia to flood the market with the energy commodity. The bearish cocktail sent crude oil below $20 per barrel and gasoline to the lowest price of this century. Corn is the primary ingredient in ethanol in the United States, which provides support for the grain. Ethanol traded to a high at $1.645 per gallon level wholesale it Q2 2019, but it traded below 90 cents per gallon in March 2020 and was at the 91.10 cents level at the end of Q1. Ethanol futures fell by 33.75% in Q1, which put pressure on the price of corn.

Source: CBOT/RMB

Corn was in contango out to July 2021, which indicates ample available supplies of the grain. From July 2021 through December 2023, the forward curve reflects seasonal factors, which are strength during the growing season and weakness during the offseason winter month contracts. Corn remained well below half the price it traded in 2012 when drought sent the grain to over $8.40 per bushel.

Technical resistance for nearby corn futures is at the $3.9400 per bushel level, which was the high from January 2020, with support at $3.32 on the weekly chart, which was the March 2020 low. Since the U.S. is the world’s largest producer of corn, the grain is the primary ingredient in US ethanol, and the price of the biofuel can influence demand for corn. After posting a gain of 14.71% in 2016, ethanol moved 17.81% lower in 2017, giving up all of the 2016 gain and more. Ethanol moved 4.24% lower in 2018 but gained 8.78% in 2019. In Q1, the biofuel fell by 33.75%. The price spread between nearby gasoline and ethanol futures closed 2017 at 44.18 cents, with gasoline trading at a significant premium to ethanol. At the end of 2018, the spread was at just a 3.81 cents premium for gasoline. In 2019, the spread was at 31.55 cents, 27.74 cents higher than at the end of 2018. On March 31, 2020, the spread was at a 31.83 cents premium for ethanol, 63.38 cents above the level at the end of 2019, with the spread flipping to a premium for the biofuel. The overall decline in ethanol on the back of gasoline prices put substantial pressure on the price of corn.

Farmers planted more soybeans than corn in 2018 as the corn-soybean ratio was above the long-term average of 2.4:1 coming into the planting season in the spring. More soybeans compared to corn had supported the price of corn, but this year was not be the same as last. Last year, farmers planted more corn than beans as the relationship returned to the average level as the planting season approached during the winter and spring of 2019.

Source: CQG

At the start of Q2, we are in the planting season for 2020. The chart shows, new-crop November 2020 soybean futures divided by new-crop December 2020 corn futures highlights; the spread was at just above the long-term average at 2.4:1 at 2.4528:1. The spread rose throughout the second half of March. If the spread remains above at the norm, farmers will plant more beans than corn in the 2020 crop year in the US.

The most recent March WASDE report from the USDA indicated that global stockpiles rose. The WASDE said:

This month’s 2019/20 U.S. corn supply and use outlook is unchanged relative to last month. The season-average corn price received by producers is lowered 5 cents to $3.80 per bushel based on observed prices to date. Global coarse grain production for 2019/20 is virtually unchanged from last month at 1,402.8 million tons. This month’s foreign coarse grain outlook is for slightly higher production, consumption, and stocks relative to last month. Global corn production is raised 0.4 million tons, as an increase for South Africa is partially offset by reductions for India, Peru, and Russia. For South Africa, production is higher as continued favorable conditions during the month of February boost yield prospects. Major global trade changes for 2019/20 include higher projected corn exports for Ukraine, South Africa, and the EU. For 2018/19, Brazil’s exports for the marketing year ending February 2020 are lowered based on smaller-than-expected late-season shipments. Partly offsetting is an increase for Argentina. Corn imports for 2019/20 are raised for Canada and Peru but lowered for the Philippines. China’s sorghum imports are raised reflecting recent purchases from the United States. Foreign corn ending stocks are raised, as increases for South Africa, Canada, and Russia more than offset a decline for Argentina. Global corn ending stocks, at 297.3 million tons, are up 0.5 million from last month.

Source: USDA

 

The path of least resistance for the price of corn during the coming months will depend on the weather in the US and northern hemisphere, but increasing population means the world depends on more output each year. Trade considerations and volatility in energy markets could cause volatility in the corn futures market over the coming weeks and throughout 2020. Corn is going into Q2 with energy prices at the lowest level in decades. Mother Nature and the weather across the fertile plains of the US is the most significant factor for the price of the coarse grain over the coming weeks.

Soybeans

Soybeans moved higher by 14.54% in 2016 but were 14.64% lower in 2015. In 2014, soybeans fell by 20.94%. In 2017, the price of soybean futures fell 4.49%. In 2018, they moved 7.28% lower for the year. In 2019, the oilseed future moved 6.86% higher. Soybeans traded in a range of $8.2100 to $9.7350 per bushel over the first quarter of 2020. Nearby soybean futures settled on March 31, at $8.8600 per bushel.

Source: CQG

As the daily chart shows, nearby May soybean futures fell with almost all other markets on the back of risk-off conditions in all markets as Coronavirus spread around the world in February and March. However, the price recovered after reaching a low in mid-March. At the end of Q1, short-term price momentum and relative strength indicators were on either side of neutral territory.

Source: CQG

The weekly chart was below neutral territory at the end of the quarter while the monthly chart on either side of a neutral condition as we head into the US planting season.

Source: CQG

Meanwhile, the quarterly chart was sitting below a neutral reading after the period of risk-off selling.

Open interest in soybean futures moved higher from 713,572 contracts at the end of Q4 2019 to 793,202 contracts at the end of Q1 2020, an increase of 79,630 contracts, or 11.16% over the last three months. The increase in open interest was a function of hedging activity as we head into the 2020 crop year in the United States. The “phase one” trade deal was bullish for soybeans, but the virus pushed the price lower.  The US is the world’s largest producer and exporter of soybeans. China purchased around one-quarter of the annual crop from the US in the past, which is why tariffs had been bearish for the price of soybean futures in 2018 and in May and August when the trade dispute escalated. The soybean futures market had been a proxy for the ups and downs of the trade war since mid-2018. Meanwhile, as Coronavirus spreads around the world, it has been causing some bottlenecks in South American ports, which could threaten supplies and may explain the rally in the second half of March.

Crushing soybeans create two products, soybean meal, and soybean oil. The meal was 18.39% higher in 2016 and fell by only 0.10% in 2017. Meal dropped 2.03% in 2018. Soybean meal was 2.07% lower in 2019. In Q1, the product that is the primary ingredient in animal feed moved 7.02% higher.

Soybean oil was up 12.67% in 2016, but it moved 3.89% lower in 2017. Soybean oil declined by 16.72% in 2018 and was 25.19% higher in 2019. The price of soybean oil futures fell 21.69% in Q1. Nearby soybean meal closed at $321.50 per ton on March 31, 2019, and soybean oil closed at 27.01 cents at the close of the first quarter. Soybean meal outperformed the beans in Q1, while soybean oil underperformed the raw oilseed. The economics of crushing beans into products improved, which typically helps margins for companies like Archer Daniels Midland (NYSE: ADM).

Source: CQG

The weekly chart of the synthetic soybean crush spread shows that the processing margin for refining the oilseed into products moved higher from $0.9725 at the end of Q4 2019 to $1.1850 at the end of Q1 2020 on the back of strength in soybean meal. Meanwhile, ADM stock tanked with the stock market in Q1. ADM stock closed Q4 at $46.35 per share and plunged to $35.18 at the end of Q1, a decline of 24.10%.

The term structure in the soybean market indicates healthy supplies.

Source: CBOT/RMB

The forward curve in beans is in contango from May 2020 through July 2020 and then reflects seasonal factors with strength during the uncertain growing season.

Support for soybean futures on the weekly chart is at the mid-March 2020 low at $8.21 per bushel. Technical resistance is at $9.49. As of the end of Q1, soybeans were trading at $8.625 per bushel and were waiting for the start of the 2020 planting season.

The latest, March WASDE report from the USDA reflects lower US, but higher global production in 2019:

U.S. soybean supply and use projections for 2019/20 are mostly unchanged this month. With soybean crush and exports projected at 2.1 billion bushels and 1.8 billion bushels, respectively, ending stocks remain at 425 million bushels, down 484 million from last year’s record. Soybean and soybean oil prices are reduced this month. The U.S. season-average soybean price is projected at $8.70 per bushel, down 5 cents. The soybean oil price is projected at 31.5 cents per pound, down 2 cents. Soybean meal prices are unchanged at $305.00 per ton. This month’s 2019/20 global oilseed outlook includes higher production and stocks relative to last month. Global soybean production is raised 2.4 million tons to 341.8 million, mainly on a 1-million-ton increase for both Argentina (to 54 million) and Brazil (to 126 million). Argentina’s larger crop is due to overall favorable conditions in higher yielding central and northwestern farming areas. Soybean crush is lowered 1 million tons for Argentina on the current pace to date. With higher South American production and lower use, global soybean stocks are increased 3.6 million tons to 102.4 million. Another notable oilseed change includes a 1-million-ton reduction for palm oil production, mainly in Malaysia and Colombia, leading to a 19 percent year-over-year decline in global vegetable oil stocks.

Source: USDA

Coronavirus and the weather in the northern hemisphere are the issues that will face the soybean market as we move forward into Q2 2020.

Wheat

In 2015 CBOT (soft red winter) wheat declined by 20.31%. It was 13.19% lower in 2016. In 2017 wheat finished the year with a 4.66% gain, and as 17.86% higher in 2018, and moved 11.03% to the upside in 2019. In Q1, CBOT wheat rose 1.79%. CBOT wheat traded in a range from $4.9175 to $5.9250 in Q1.

Source: CQG

As the daily chart of the CBOT May wheat futures contract highlights, the price found a bottom in mid-March. March CBOT wheat futures were falling towards neutral territory after a correction from the recent high, and on March 31, 2020, they were trading at $5.6875 per bushel on the final day of Q1.

Source: CQG

Meanwhile, the weekly chart displays that price momentum was in neutral territory at the end of Q1.

Source: CQG

The quarterly chart shows that wheat is trending higher, and the price trend is bullish with an above neutral reading at the end of Q1. Open interest in the most liquid wheat futures series of contracts moved lower from 411,204 at the end of Q4 to 372,589 contracts at the end of Q1 2020, a decline of 38,615 contracts, or 9.39%. Technical resistance is at the 2018 high at the $5.93 level with support at the $4.1625 per bushel.

May hard red winter wheat futures, traded on the Kansas City Board of Trade (KCBT) closed at $4.9300 per bushel on March 31, 2020, and was 1.44% higher in Q1. KCBT wheat was 0.56% lower in 2019 after rising 14.4% in 2018. KCBT wheat fell 25.22% in 2015 and was down 10.67% in 2016, but it rebounded by 2.09% higher in 2017. KCBT wheat was historically weak compared to CBOT throughout 2019, and at the end of Q1 2020.

On March 31, at the end of Q1, the spread between CBOT and KCBT wheat was trading at a premium for CBOT wheat of 75.75 as it moved 3.00 cents away from the norm for the spread in Q1. The long-term average for the spread is a 20-30 cents premium for KCBT hard red winter wheat.

Hard red spring wheat, traded on the Minneapolis Grain Exchange (MGE), closed at $5.3925 per bushel on the nearby futures contract and posted a loss of 3.88% in Q1. MGE wheat was 2.19% higher in 2019, after dropping by 10.7% in 2018 after a 14.27% gain in 2017. MGE wheat was 9.07% higher in 2016 but declined by 20.7% in 2015.

The spread between KCBT and CBOT wheat is a historical divergence that is telling us that consumers in the US are not hedging their requirements. If the price of wheat turns higher, we could see a scramble to hedge future consumption, which could fuel higher prices and a mean reversion move in the KCBT-CBOT spread. The spread was at a level that could trigger panic in 2020 if drought conditions threaten supplies.

The USDA told markets that US exports rose leading to lower ending stocks. However, global inventories rose because of a decline in consumption in the March WASDE report:

The 2019/20 U.S. wheat supply and demand outlook is unchanged this month. The projected season-average farm price is also unchanged at $4.55 per bushel. The 2019/20 global outlook this month for wheat is for higher production, increased consumption and exports, and lower ending stocks. Output is raised on higher production forecasts for India and Argentina more than offsetting reductions for Turkey and Australia. India’s production is raised 1.4 million tons to a record 103.6 million, mainly on an updated government production estimate. World exports are increased by 0.8 million tons to 183.6 million as higher exports by Russia and Argentina more than offset reductions for Canada and Australia. Russia’s exports are increased 1.0 million tons to 35.0 million, primarily on higher projected imports by Turkey as Russia is its leading supplier. Turkey’s wheat imports are raised 2.0 million tons to a record-large 10.5 million on higher consumption, reduced production, and government policies to import additional quantities duty-free to stabilize domestic prices. Turkey’s wheat imports have been rising for the last decade and the country is now projected to be the third-largest importer for 2019/20 behind Egypt and Indonesia. Wheat imports are also higher for Bangladesh as they increased to a record 6.5 million tons on a robust pace. Global consumption is raised 0.7 million tons as increases for Turkey, Bangladesh, and Canada more than offset reductions for the EU, Iraq, and Lebanon. Global ending stocks are projected lower this month but remain record large for the 2019/20 crop year at 287.1 million tons with China comprising 52 percent of the total.

Source: USDA

Wheat prices turned higher after reaching a low on March 16 and did not return to the low.

Source: CBOT/RMB

Wheat is in backwardation from May 2020 through July 2020 and then is in contango through March 2021 when season factors take over, which is a sign of sufficient supplies.

Demographics, when it comes to population growth continues to put upward pressure on demand, and the world will need another year of a bumper wheat crop around the globe in 2020 to keep the price from running away on the upside. Coronavirus will continue to pose a threat to demand, but it could also lift prices if the virus interferes with production during the 2020 crop year.

Oat futures fell 9.50% in Q1 after rising 6.09% in 2019. Oats moved 14.2% higher in 2018. Nearby oat futures closed on March 31 at $2.6425 per bushel. Rice futures rose by 6.85% in Q1. Rice moved 30.11% higher in 2019 after falling 13.57% in 2018. Nearby rough rice futures closed at $14.035 on March 31. Rice tends to trade by appointment in the US futures market as the contracts lack liquidity. In the March WASDE report the USDA told the rice market:

The 2019/20 U.S. rice supply and use estimates are unchanged relative to last month. The projected all rice season-average farm price is unchanged at $13.00 per cwt; however, the Other States medium-grain price is lowered $0.20 per cwt to $11.90. Global 2019/20 rice supplies are raised 3.4 million tons primarily on a 3.0-million-ton increase for India production stemming from revised government data. Global exports are lowered 0.5 million tons primarily on a reduced forecast for India, despite its larger supplies. India’s exports are lowered 0.7 million tons on a slowing pace of trade to African markets. Global imports are reduced 0.6 million tons led by a 0.3-million-ton reduction for Nigeria which was lowered on a slowing pace of parboiled exports to West Africa and enforcement of land border closures. India is an important parboiled rice exporter to the region. World consumption is lowered 0.8 million tons, led by a 0.5- million-ton reduction for India. With supplies higher and use revised down this month, global ending stocks are raised 4.2 million tons. Outside of several small and mostly offsetting changes, India accounts for nearly all of the global stock increase. India and world stocks are now projected at 35.0 million tons and 182.3 million tons respectively.

Source: USDA

Grain prices are going into Q2 amid a global meltdown in markets across all asset classes. With an ever-rising demand side of the fundamental equation and the supply side as fickle as the weather, we could see lots of volatility in the grain sector in Q2. However, it a combination of risk-off conditions and the spread of the virus that will have the most significant impact on markets over the coming three months.

The bottom line: Outlook for Q2 2020

Each year is a new adventure in the grain markets as Mother Nature is the ultimate arbiter of the path of least resistance for prices. We are now entering the 2020 plating season, facing the challenge of the worst black swan even since the 1930s. The one sure thing is that the demand for grains will rise as it is a function of demographics. The prices of most of the leading grain futures market reflect ample supplies, but the weather and ability to plant and transport grains around the globe in the face of a pandemic are the crucial factors for prices. At the same time, a stronger US dollar in Q1 is not supportive of prices.

Population growth should continue to support higher lows for all agricultural commodities. Growing demand for food means puts constant pressure on the supply side of the fundamental equation for grains.

I am going into Q2 with minimal long core positions in the CORN, SOYB, and WEAT ETFs and the futures and options on futures on the CBOT. However, I will look to buy on any price weakness over the coming weeks, but I will use tight stops on any new positions. If the market stops me out, I will look to add at lower levels. I will look to use call options for long positions or put positions to protect outright long positions to minimize risk in the current environment, which is dangerous in all markets.

The individual corn, soybean, and wheat ETFs offered by the Teucrium family of funds tend to do a good job replicating price action in the grain futures markets. However, with the forward curve in contango where deferred prices are higher than nearby prices long positions in ETFs, futures or options on futures reflect the cost of the term structure. If the prices do not move to the upside, and even if they remain static, many of the products will lose value. Therefore, buying strategically on dips when downside price momentum declines may be the optimal approach to the grain markets over the coming months.

I continue to believe that the level of the KCBT-CBOT wheat spread at a $0.7575 premium for CBOT wheat is unsustainable. The spread will eventually move towards the norm, which is a 20-30 cents premium for the KCBT hard winter wheat, eventually. However, a position in this spread had been a losing proposition throughout 2019 and most of Q1 2020.

The iPath Series B Bloomberg Grains Subindex Total Return ETN product (JJG) moves higher and lower with the price of grains. The fund summary for JJG states:

The investment seeks return linked to the performance of the Bloomberg Grains Subindex Total Return. The ETN offers exposure to futures contracts and not direct exposure to the physical commodities. The index is composed of one or more futures contracts on the relevant commodity (the “index components”) and is intended to reflect the returns that are potentially available through (1) an unleveraged investment in those contracts plus (2) the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.

Source: Yahoo Finance

The grain sector posted a 3.81% loss in Q1.

Source: Barchart

As the chart of JJG illustrates, it moved from $46.15 at the end of Q4 to $42.60 at the end of Q1, a loss of $3.55, or 7.69%. The lower performance reflects the price action in the corn market over the quarter. Additionally, the cost of rolling futures from one active month to the next in contango markets weighed on the value of the JJG ETN. JJG has net assets of $17.87 million, trades an average of 3,127 shares each day, and charges an expense ratio of 0.45%. Net assets fell from the end of Q4 2019 to the end of Q1 2020, but the average daily trading volume rose over the period.

I believe that the long-term trend in this sector of the raw materials asset class that feeds the world is higher. More people, with more resources in the world, will continue to require nutrition to sustain their lives. As we enter the time of year where uncertainty over the 2020 crop rises to a peak, I expect periods of volatility and risk-reward favors the upside for prices. However, the global pandemic is a reason for increased caution when approaching any market.

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.