U.S. corn futures are hovering over a one-month high level after “the U.S. Department of Agriculture (USDA) pegged the condition of crops behind market expectations,” per Reuters. The USDA’s good-to-excellent ratings for the country’s corn and soybean crops fell shy of analyst expectations, falling even further than the expected 2 percentage points each as conditions in the Midwest worsened due to hot and dry weather.

The Reuters article indicated that corn underwent the biggest decline, with just 64% of the crop rated good to excellent, a 5-percentage point fall from last week and 3% lower than analyst expectations. Advisory service Pro Farmer recently projected that U.S. corn and soybean harvests will fall below the U.S. government’s forecasts, with a corn crop of 14.820 billion bushels and a soybean crop of 4.362 billion bushels, as indicated by Reuters.

Overall, "U.S. storm damage and Chinese demand are supporting corn prices," said Phin Ziebell, an agribusiness economist at National Australia Bank in Melbourne, as quoted on agriculture.com. On the other hand, wheat has been extending gains on weather concerns in Argentina."Notably, Argentina is a key global wheat exporter.

Will the Rally Last?

“Lower demand for ethanol will limit the upside potential,” said the agribusiness economist at National Australia Bank. On the other hand, China's demand for corn to feed animals has risen “as its pig herd has rebounded more quickly than expected from a deadly swine disease.”

Hence, Chinese buyers clinched deals to buy 195,000 tons of American corn, the U.S. Department of Agriculture said lately, as China has been struggling with soaring domestic prices. Larger imports from the United States will also help China to meet the pledge to buy more U.S. farm products as part of a Phase 1 trade deal signed in January. In short, demand for U.S. corn will remain high amid strong export activity.

However, the greenback has been rising lately, which will act as a dampener for broad-based commodity trading. Invesco DB US Dollar Index Bullish Fund (UUP) has gained 0.3% past week. The Fed’s reluctance to control the yield curve, vaccine hopes and some moderately upbeat U.S. economic indicators contributed to the greenback strength. If the U.S. currency continues to rise, the price of commodities are likely to fall as these are priced in U.S. dollar.

ETFs in Focus

Against this backdrop, investors can bet on the above-said agricultural ETFs as long as the trend is a friend.

Teucrium Corn Fund (CORN Quick QuoteCORN - Free Report)

The CBOT Corn Futures Contract looks to reflect the daily changes of a weighted average of the closing prices for three futures contracts for corn that are traded on the CBOT. The expense ratio of the product is 3.12%. The product is up 1.1% in the past five days.

Teucrium Soybean ETF (SOYB Quick QuoteSOYB - Free Report)

This underlying index looks to reflect the daily changes of a weighted average of the closing prices for three futures contracts for soybeans that are traded on the CBOT. The three contracts will be: 2nd-to-expire contract, 3rd-to-expire contract and the contract expiring in the November following the expiration month of the 3rd-to-expire contract. The expense ratio of the product is 3.15%.

Teucrium Wheat ETF (WEAT Quick QuoteWEAT - Free Report)

The wheat futures look to reflect the daily changes of a weighted average of the closing prices for 3 futures contracts for wheat that are traded on the CBOT: the second-to-expire contract, the third-to-expire contract and the contract expiring in the December following the expiration month of the third-to-expire contract. The expense ratio of the fund is 3.14%.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>