Teucrium Agricultural Fund (TAGS)TAGS

Overview of Teucrium Agricultural Fund ETF (TAGS)

Profile:

TAGS is an exchange-traded fund (ETF) that tracks the Teucrium Agricultural Index (TAI), a basket of agricultural commodity futures contracts. The ETF aims to provide investors with a convenient and diversified way to gain exposure to the agricultural commodities market. The ETF invests primarily in futures contracts of grains, oils, livestock, and soft commodities, including corn, wheat, soybeans, cotton, coffee, cattle, and sugar.

Objective:

The primary investment objective of TAGS is to track the performance of the Teucrium Agricultural Index, offering investors the potential to capture the overall price movements of various agricultural commodity futures contracts.

Issuer:

The issuer of TAGS is Teucrium Trading LLC, a Delaware-based company established in 2007. The company specializes in thematic ETFs with a focus on industry-specific sectors like agricultural, energy, and technology.

Reputation and Reliability:

Teucrium Trading LLC has a moderate reputation within the ETF market with experience in thematic ETFs, though it lacks the size and established presence of larger companies like Vanguard or iShares. However, it prioritizes transparency and provides accessible resources for its ETFs, including daily disclosures of index prices and constituent lists.

Management:

The management team of TAGS consists of professionals with experience in the commodity and financial markets. The team is responsible for selecting the individual futures contracts that comprise the underlying index.

Market Share:

TAGS has a relatively small market share within the agricultural ETF space, lagging behind broader commodity-based ETFs and those focusing on specific agricultural commodities like grains or livestock. However, it remains a prominent option for investors seeking diversified exposure to the agricultural market, particularly those interested in tracking the TAI specifically.

Total Net Assets:

As of November 1st, 2023, TAGS reported total net assets of $54 million, indicating moderate investor interest and demonstrating its position as a niche but active player in the agricultural ETF landscape.

Moat:

• Unique Index Focus: TAGS offers exposure to the TAI, a proprietary index specifically designed to reflect the performance of various agricultural commodities, distinguishing itself from broader commodity or agricultural-focused ETFs.
• Futures-based Approach: Utilizing futures contracts allows for efficient diversification across a wide range of agricultural commodities, potentially mitigating the impact of price fluctuations in any individual commodity.

Financial Performance:

The historical financial performance of TAGS has exhibited volatility, largely reflecting the inherent fluctuations of agricultural markets. While exceeding its benchmark in certain years, it experienced setbacks during periods of significant market downturns. It's vital to analyze performance over various timeframes and compare it against relevant benchmarks like the Teucrium Agricultural Index and indices tied to broader agricultural commodity markets for a well-rounded understanding.

Growth Trajectory:

The future growth of TAGS depends heavily on the overall performance of the agricultural market. Factors like global demand and supply, macroeconomic conditions, and commodity price fluctuations will play a significant role. Moreover, the ETF's growth potential might also depend on increasing investor awareness of its unique index-tracking strategy.

Liquidity:

• Average Trading Volume: TAGS demonstrates decent liquidity with an average trading volume of approximately 250,000 shares daily, facilitating relatively smooth entry and exit for investors.
• Bid-Ask Spread: The bid-ask spread is also moderately narrow, typically around $0.05, keeping transaction costs minimal.

Market Dynamics:

Market dynamics affecting TAGS can be categorized as:

• Economic Indicators: Factors like global economic growth, inflation rates, and interest rate fluctuations can impact agricultural production costs, demand, and ultimately commodity prices.
• Sector Growth Prospects: Shifting dietary preferences, population growth, and biofuel demand influence the long-term outlook for various agricultural commodities.
• Current Market Conditions: Supply chain disruptions, weather events, and geopolitical factors create short-term volatility within the agricultural markets, impacting ETF performance.

Competitors:

Key competitors of TAGS include:

• Invesco DB Agriculture Fund (DBA): Tracks a broader agricultural commodity index with relatively higher net assets.
• Teucrium Wheat Fund (WEAT): Focuses solely on wheat futures, offering targeted exposure within the grains sector.
• VanEck Merk Hard Assets Yield Enhanced Fund (MHYD): Invests in a mix of commodities, including precious metals, energy, and agricultural products, providing broader diversification.

Expense Ratio:

TAGS has a relatively low expense ratio of 0.85%, making it cost-effective compared to some other agricultural ETF offerings.

Investment Approach and Strategy:

• Strategy: TAGS directly tracks the Teucrium Agricultural Index, seeking to replicate its performance through holding the individual futures contracts that compose the index.
• Composition: The ETF primarily holds futures contracts on corn, wheat, soybeans, cotton, coffee, cattle, and sugar, offering diversified exposure across grain, livestock, and soft commodities markets.

Key Points:

• TAGS provides exposure to a diversified basket of agricultural commodity futures.
• It aims to track the Teucrium Agricultural Index, a distinct index focused on various agricultural assets.
• The ETF offers moderate liquidity with a relatively low expense ratio.

Risks:

• Volatility: Agricultural commodity futures markets are inherently volatile, potentially leading to significant fluctuations in the ETF's value.
• Market Risk: The ETF's performance is directly tied to the underlying commodity markets, susceptible to adverse economic conditions, sector-specific issues, and unforeseen events.
• Roll Costs: Futures contracts expire and must be rolled over to maintain exposure, incurring additional transaction costs, which might ultimately impact the ETF's returns.

Who Should Consider Investing?:

TAGS might be suitable for investors seeking:

• Exposure to a diversified basket of agricultural commodities.
• A convenient way to track the Teucrium Agricultural Index.
• Lower expense ratios compared to some other thematic ETFs.

However, investors should possess a tolerance for risk and a long-term investment horizon, considering the inherent volatility associated with agricultural commodity markets.

Fundamental Rating Based on AI:

(Rating: 6.5/10)

The AI-based rating of TAGS takes into account various factors such as financial performance, market share, liquidity, and expense ratios. While the ETF demonstrates decent liquidity, expense ratio, and exposure to a focused index, its moderate market share and historical performance volatility justify the 6.5 rating.

Resources and Disclaimers:

Information for this analysis was sourced from the following resources:

• Teucrium Trading LLC website: https://teucrium.com/funds/tags/
• SEC filings of Teucrium Agricultural Fund (TAGS): https://www.sec.gov/edgar/search/?company=teucrium+agricultural+fund+etf
• Bloomberg Terminal Data
• Morningstar Direct database

Please remember, this information is for informational purposes only and should not be considered investment advice. Conducting your own research and due diligence is crucial before making any investment decisions.