ETF Report: Commodities, Corn Jump On Heat, Summer Weather

General commodity indexes were higher yesterday as DB Commodity Tracking Indicator (NYSEARCA:DBC) added 1.1%. The index tracks major commodity groups including oil, gasoline, natural gas, gold, silver, aluminum, copper, corN, wheat and soybeans.

Natural gas was a solid winner for the day with United States Natural Gas ETN (NYSEARCA:UNG) jumping 3.6% as speculators bet on hot weather boosting natural gas demand at power plants across the Midwest.

Oil rose with United States Oil Fund (NYSEARCA:USO) adding 2.6% after the U.S. Energy Department reported declining supplies and the summer driving season swings into high gear. West Texas Intermediate Crude rose to $86.03/bbl.

Most agricultural commodities were higher with sugar, coffee and cotton advancing.

Corn and soybeans dropped yesterday but have been in strong rallies as the U.S. Department of Agriculture declared a state of emergency for large portions of the Midwest due to the ongoing drought conditions in the region. Approximately 30% of the United States is included in the declaration of emergency as drought impacts more than 50% of the breadbasket in the Midwest.

The corn crop is expected to be impacted by the drought and so supplies are expected to be lower than normal with commensurate higher prices for corn and corn based products. This is the worst drought in a decade and prices have been on a significant rally since early June with PowerShares DB Agriculture (NYSEARCA:DBA) up more than 14% since mid-June. The index includes corn, wheat, soybeans and sugar.

Commodity ETF Roundup:
 
PowerShares DB Commodity Index Tracking Fund ETF (NYSEARCA:DBC): +1.1%, This ETF is a broad-based commodities ETF which directly tracks the DBIQ Optimum Yield Diversified Commodity Index Excess Return. The DBIQ Optimum Yield Diversified Commodity Index Excess Return represents the 14 most heavily traded commodities worldwide, including light crude oil, brent crude oil, gold, aluminum, and corn.
 
PowerShares DB Agriculture Fund ETF (NYSEARCA:DBA): -0.5%, This ETF is an agricultural commodity based ETF which tracks the performance of the DBIQ Diversified Agriculture Index Excess Return. The DBIQ Diversified Agriculture Index Excess Return reflects the performance of the world’s most sought after agriculture commodities including corn, soybeans, sugar, and cocoa.
 
Market Vectors Agribusiness ETF (NYSEARCA:MOO): +0.7%, This ETF is an agricultural ETF which directly tracks the DAXglobal Agribusiness Index (DXAG). The DXAG Index reflects the performance of agriculture companies which are traded on global exchanges; companies include Monsanto Company, Wilmar International LTD, and Deer & Co.
 
United States Oil Fund LP ETF (NYSEARCA:USO):  +2.6%, This ETF is a commodity based ETF designed to track the price of West Texas Intermediate Crude Oil. The United States Oil Fund LP ETF (NYSEARCA:USO) reflects the price of oil delivered to Cushing, Oklahoma and is traded as futures contracts on The New York Mercantile Exchange (NYMEX).
 
United States Natural Gas Fund LP ETF (NYSEARCA:UNG): +3.6%, This ETF is a commodity based ETF designed to track the price of Natural Gas delivered to Henry Hub, Louisiana. The United States Natural Gas Fund LP ETF (NYSEARCA:UNG) is traded as futures contracts on The New York Mercantile Exchange (NYMEX).
 
Bottom line:  Drought conditions will add to food and energy prices as the nation’s heartland struggles with extreme heat. Commodity ETFs are likely to remain strong as summer driving and energy demand spikes.
 
Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.