Blueprint
Issuer
Free Writing Prospectus
Filed Pursuant to
Rule 433
Registration No. 333-223941
April 18,
2019
FWP
NOTICE
The Teucrium
Commodity Trust has filed a registration statement (including a
prospectus) with the SEC for the offering to which this
communication relates. Before you invest, you should read the
prospectus in that registration statement and other documents that
the Teucrium Commodity Trust has filed with the SEC for more
complete information about the issuer and this offering. You may
get these documents for free by visiting EDGAR on the SEC Web site
at www.sec.gov. Alternatively, a copy of the prospectus may be
obtained online or by calling (802) 540-0019:
SOYB: http://www.teucriumsoybfund.com/pdfs/soyb-prospectus.pdf
CANE: http://www.teucriumcanefund.com/pdfs/cane-prospectus.pdf
WEAT: http://www.teucriumweatfund.com/pdfs/weat-prospectus.pdf
CORN: http://www.teucriumcornfund.com/pdfs/corn-prospectus.pdf
TAGS: http://www.teucriumtagsfund.com/pdfs/tags-prospectus.pdf
On April 15, 2019,
Money Life Podcast conducted an interview during their “Big
Interview” segment with Sal Gilbertie, President and Chief
Executive Officer of Teucrium Trading, LLC. A transcript of the
interview is set forth below.
Chuck Jaffe Money Life
Podcast – Big Interview with Sal Gilbertie, April 15,
2019
Chuck Jaffe: Welcome to the Big
Interview on today’s show, and I’m very pleased to be
joined right now by Sal Gilbertie. He is the President and Chief
Investment Officer at Teucrium Trading, and if you’re not
familiar with the company Teucrium, T-E-U-C-R-I-U-M, teucrium.com
is the website. Teucrium is the purveyor of grain-based ETFs.
That’s another way of saying commodity ETFs, but specifically
commodities that go towards things like corn and soybeans and
wheat, and agricultural things. And, we were talking on the show
last week a little bit with Tom Lydon about a more general
commodities ETF, but commodities play a role in diversifying a
portfolio, but they’re not something that everybody
necessarily knows a lot about, and there are a lot of different
choices. If you want to learn more about the choices that Teucrium
is doing, again, it’s teucrium.com.
Sal Gilbertie, welcome back to Money
Life.
Sal
Gilbertie: Thanks, Chuck. Happy to be
here.
Chuck Jaffe: So, as I said, we were
discussing last week with Tom Lydon on this show the GSG, which is
a more broadly diversified commodity index trust. It’s the
iShares S&P GSCI, and commodities, well, quite honestly, they
were pretty horrible if you look at them across the board in 2018,
but broadly speaking they’ve been doing very well this year,
and they’ve been beating the market depending on which
commodity you’re doing, and I guess that’s kind of
proving the fact that maybe they’re not correlated to
what’s happening with the S&P 500, which is the reason
why you want them. But they did kind of move in concert, so did
they prove that point enough, or are we going to need a different
market environment to prove that?
Sal
Gilbertie: Well, I think definitely a different market
environment will prove it for the disbelievers, but for those who
just look at the statistics, if you look at long-term correlation
coefficients of commodities versus the S&P 500, there’s
no question that most of them are correlated. Okay? So, they
don’t have a negative correlation. They actually do have a
positive correlation, but, for instance, in a study that we publish
once a year and it does live on our website, platinum was
correlated 0.04. That was the correlation coefficient, versus
palladium which was the highest with S&P at 0.77. Gold, second
highest at 0.48. So, people, most people I think use gold and
probably oil in their commodity exposure if they’re not using
a broad basket, or if they want to enhance that broad basket. Those
two things actually correlate more with the S&P 500 than people
expect, especially gold. The interesting part – and of course
Teucrium is an agriculturally focused company, we have you know a
fund called Corn and that’s the ticker, but wheat, corn,
sugar and soybeans, all four of them, every time we run the study,
which is annually and it’s a 20-year backwards-looking study,
they are far less correlated to the S&P 500 than gold, yet all
the commodities have a very tiny correlation, and so commodities do
diversify your portfolio.
Chuck Jaffe: I’ve seen that study
and it says, for example, that corn is typically about 0.25, which
means that it’s only going to move 25% of its movement would
be in conjunction with the S&P.
Sal
Gilbertie: Correct. It’s actually soybeans that were
0.25. Corn is 0.13 right now, as of the last
study.
Chuck Jaffe: Okay.
Sal
Gilbertie: They’re really small compared to gold,
which is 0.48.
Chuck Jaffe: That said, how does
somebody try to figure out the right way to do this?, Because as
you point out, gold has been their commodity, and maybe sometimes
they’re looking at oil or things along those lines, and a lot
of people get their oil exposure directly through their energy
funds. So, we’re talking about a totally different animal
when we go into let’s try to be in commodities, let alone
when we get as diversified as we would with you. How does somebody
do this and what are the benefits to let me specialize in a
commodity with a piece of my money, versus let me buy that broader
indexed or more diversified commodity fund?
Sal
Gilbertie: Well, I think everyone should start with a broad
index, you know, there’s no question because it really is
proven that adding commodities to your portfolio, they really do
diversify, and they really do help you. You start with a broad
index but then there are headline news, there are certain things
where you … Look it, you take your stock portfolio and you
don’t just invest in one thing. You invest in sectors. You
invest in large cap, small cap, foreign equities, emerging markets.
Why wouldn’t you do that with your commodities as
well?
So, everybody starts with the
S&P 500. They start with a general bond fund, but then they
breakdown or enhance their exposure and people should think exactly
the same way about commodities. You start with a broad basket, and
there are many really good ones out there that offer good exposure,
and then most people do want to add some gold, most people they
understand energy, they get the headlines. When oil prices you
know, cycle down towards $40 a barrel you see these massive inflows
coming into the energy funds, and when they start getting higher,
oil often, money often cycles out, but nobody does that with
grains.
To us, the grains are the next leg
of what you should make sure you’re enhancing in your
portfolio because people—and we said this on a prior show
with you. People use so much grain, in fact, corn, they probably
use—corn is as pervasive in their daily lives as oil. So,
everybody says, “I drove to work today. Wow, I just heard on
the news oil went down to 40 bucks a barrel or below. That’s
breakeven.” That’s the headline breakeven. “I
think I’ll put some money in an oil fund,” and they do.
Whereas they hear that corn is trading at $3.50 a bushel, which is
breakeven or below, nobody even thinks about it, yet there’s
corn in that gasoline. So, when they drove to work, yes you used
energy; you also used corn. When you use paper, that’s
corn’s you know, fourth biggest use globally is to hold paper
together with corn starch. When you eat meat, that’s
corn’s number one use, to feed animals. So if you’re a
meat eater, you basically have to—you’re using corn.
You’re using corn and you’re using just as much corn as
oil, so there’s not any way you could escape using grains in
your life and that should be the next thing added to your portfolio
besides gold and oil, which everybody does.
Chuck Jaffe: In terms of the investments
for people, you know commodities have a reputation for being very
volatile and they can be because of course you’re dabbling in
futures and everything else. And I would assume that the more we
specialize in, whether it’s coming to a grain-based product
like one of yours, or if it’s going with any sort of
specialty metals fund, etc., that the narrower we get the more
volatile we’re going to be and the more we have to know. I
mean corn, for example, I know from what little I know about
commodities and having talked to commodities traders, that corn is
very seasonal in how it trades, and there’s a lot of stuff
that goes on at certain times of the year that, if you’re not
on top of it, a day makes a huge difference at times. So, how much
do people have to be able to drill down?
Sal
Gilbertie: If you want to be a trader, you have to drill
down a lot. If you want to be an investor, let’s say a
tactical allocator, then you don’t have to drill down so
much.
Here’s a secret about Ags, and
this is really key. Ags trade at their cost of production,
especially the big Ags like corn, soybeans, wheat and sugar. They
are subsidized. All the governments in the world subsidize their
farmers in one way or another so that we don’t have food
shortages. So, the natural state of pricing structure in the big
commodities like corn or wheat or soybeans or sugar is breakeven.
And so, when you look at a chart, you could see these things
flatline. In fact, corn is entering its fifth year of trading
between $3.50 and $4.00 a bushel. That’s just where it
trades. It’s breakeven. Yet when there’s a drought,
twice in the last 12 years, corn has doubled and gone up to $7.50
or $8.00 a bushel because it didn’t rain, and so the key for
a tactical allocator is pick the commodities that you want in
there. Start with your general commodity. You’ve got your
gold; you’ve got your oil. What are you looking at in grains?
Grains, the use of grains increases every year. It’s either a
record or the second highest amount. The combined use of corn,
wheat and soybeans every single year globally is either a record or
the second highest amount ever. Demand never abates; in fact, it
rises.
So, when you have a supply
disruption, and a disruption doesn’t mean no corn or no
soybeans. It simply means it didn’t rain enough to get as
many bushels out of an acre, and that can be pretty nominal because
we really run tight. The average amount of wheat left over in the
world after any given crop year is six months, and that’s the
highest. Corn is more like six weeks. So if the next year,
theoretically, nothing grew or you had a problem, you’ve only
got six weeks of surplus and that’s why prices double almost
instantly, and by instantly, I mean within a year of there being
say a summertime drought in the Northern
Hemisphere.
And so, all investors need to do for
corn, to understand corn, soybeans and wheat is when they see them
trading at a flat line, that is probably, if you look back on the
chart and you could see corn going back 12 years in the post
ethanol era we’ll call it, since we started putting ethanol
in the fuel in the United States, corn’s breakeven is $3.50
to $4.00 a bushel. You layer that into your portfolio, is what
advisors do. They put 1% or 5%, whatever the mix is, they put it
into their portfolio, and then they wait. In fact, the slogan some
people say to us is ‘Weight – W-E-I-G-H-T, wait –
W-A-I-T and then drought, get out.’ Because when
there’s a drought, you see the headlines, the price doubles
and you get out. The biggest mistake people can make is getting
into a commodity when it’s in the headlines. You’re
going to be hurt if you do that. You need to
look-
Chuck Jaffe: Well, and those headlines
are not just about droughts. They can also be trade embargoes and
things along those lines these days, can’t
they?
Sal
Gilbertie: That’s correct, and interestingly enough
we’re running into a situation today where and in the past
several months, where the headlines about the China/U.S. trade
dispute are actually hurting grain prices and have driven them down
at or mostly below the cost of production here in the U.S. Many
people are saying that’s an opportunity.
When the trade agreement is reached,
China can’t do without our products. It’s impossible.
There isn’t enough food in the world. There aren’t
enough bushels of corn or bushels of soybeans in the world for them
not to buy from the United States. They must buy United States
product. The only thing that will happen in the train deal, trade
deal when it’s resolved is that we’ll know how much
China is going to commit to buying from us, and it’s going to
be enormous. It’s going to be enormous.
The other thing people don’t
understand is that you’ve got corn trading at breakeven right
now. You layer that into your portfolio, say, if you’re a
tactical allocator. When it doubles, people rebalance all the
time.
Chuck Jaffe: Yes.
Sal
Gilbertie: When it goes up 25%, 50%, whatever, either
rebalance or get out.
Chuck Jaffe: Yes. If you’re going
to go the commodities route, that you have to be very disciplined
about because leaving your profits on the table is a way to wind up
seeing your profits go away.
Sal
Gilbertie: Absolutely, and in Ags it’s
even—well, in all commodities, but in Ags it’s very,
very exacerbated, if you will, because the next planting season
when you have a price rise in an agricultural commodity, every
farmer in the world who can plant that commodity will. They want to
make more money, like all of us …
Chuck Jaffe: Yes,
exactly.
Sal
Gilbertie: … and so that price will go right back
down. Allocate.
Chuck Jaffe: Sal, great stuff.
We’re out of time. Thanks so much for joining me on the show.
We look forward to chatting with you again down the
line.
Sal
Gilbertie: Always a pleasure, Chuck.
Chuck Jaffe: That’s Sal Gilbertie,
everybody. He is President and Chief Investment Officer at Teucrium
Trading. Go to teucrium.com for more
information.