When the President speaks...We must also change how we power our automobiles. We will increase our research in better batteries for hybrid and electric cars, and in pollution-free cars that run on hydrogen. We'll also fund additional research in cutting-edge methods of producing ethanol, not just from corn, but from wood chips and stalks, or switch grass. Our goal is to make this new kind of ethanol practical and competitive within six years. (State of the Union Address, 01/31/06)...clients call to ask how to invest in corn and ethanol.
The pure play on corn is in trading futures. This requires a commodities account and a commodities broker who knows what he/she is doing. Correlations to U.S. stocks and bonds are low but risks are high and not something for the average investor. Think "Trading Places."
Managed futures, which are actively managed, diversified portfolios of commodities contracts, are geared for investors with large portfolios, usually require a financial advisor with a Series 31 registration and are more accessible to individual investors. But if you just want to play corn, managed futures are not the best solution because you're also getting futures contracts on gold, aluminum, orange juice, etc.
As for individual stocks, the big companies in the ethanol game are Archer-Daniels-Midland (ADM) and Monsanto (MON). And, if you're feeling adventurous, Pacific Ethanol (PEIX) is the purest play but the stock has nearly tripled since last fall. It might be a little overbought at $18.00.
My best advice, if you already have a few hundred acres in corn, don't plow it up for a baseball field.
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