10-K: Teucrium Commodity Trust Files 10-K Report, Details Fund Performance and Operational Updates

Teucrium Commodity Trust releases its annual 10-K report, providing a comprehensive overview of its financial condition, operational results, and investment strategies across its various commodity-focused funds.

Summary

• Teucrium Commodity Trust, a series trust consisting of six series, has filed its annual 10-K report for the fiscal year ended December 31, 2023.
• The report details the financial condition, results of operations, changes in net assets, and cash flows for each of the Funds, including Teucrium Corn Fund (CORN), Teucrium Sugar Fund (CANE), Teucrium Soybean Fund (SOYB), Teucrium Wheat Fund (WEAT), Teucrium Agricultural Fund (TAGS), and Hashdex Bitcoin Futures ETF (DEFI).
• The investment objective of the Agricultural Funds and DEFI is to have the daily changes in the NAV of each Funds Shares reflect the daily changes in a weighted average of the closing settlement prices for certain futures contracts for the commodity or cryptocurrency specified in the Funds name.
• The investment objective of TAGS is to provide daily investment results that reflect the combined daily performance of the Agricultural Funds.
• The report includes a discussion of the market outlook for corn, soybeans, sugar, and wheat, as well as the bitcoin industry.
• The report also details the contractual fees and compensation arrangements with the Sponsor and third-party service providers.
• The report notes that DEFI merged into an unaffiliated trust on January 3, 2024, and is no longer a series of the Trust.

Sentiment

Score: 4

Explanation: The document presents a mixed picture, with some positive aspects such as the detailed operational information and risk management strategies, but also significant negative aspects such as the decrease in net assets for most of the Funds, the potential for conflicts of interest, and the risks associated with the Funds structure and operations. The overall sentiment is therefore slightly negative.

Positives

• The report provides a comprehensive overview of the Trusts operations and financial performance.
• The report details the risk management strategies employed by the Sponsor.
• The report includes a discussion of the Sponsors information security program and policy.
• The report provides a detailed description of the Funds investment strategies and benchmarks.
• The report includes a discussion of the market outlook for the commodities and cryptocurrency in which the Funds invest.

Negatives

• The report notes that the Funds may change their investment objectives, benchmarks, or investment strategies without shareholder approval or advance notice.
• The report notes that the Funds do not intend to make cash distributions to shareholders.
• The report notes that the Funds may terminate at any time, regardless of whether the Funds have incurred losses.
• The report notes that the Funds are subject to position limits and accountability levels set by the CFTC and the exchanges.
• The report notes that the Funds are subject to the credit risk of their counterparties.
• The report notes that the Funds are subject to the risks of cyberattacks and other information security breaches.
• The report notes that the Funds are subject to the risks of market volatility and illiquidity.
• The report notes that the Funds are subject to the risks of regulatory changes.
• The report notes that the Funds are subject to the risks of conflicts of interest.
• The report notes that the Funds are subject to the risks of the Sponsor's reliance on a small number of key personnel.

Risks

• The report highlights the risk that the performance of each Fund may not correlate with its applicable benchmark.
• The report notes the risks related to the Funds structure and operations, including the possibility of changes to investment objectives or strategies.
• The report notes the risk that the Funds shares may trade at a premium or discount to NAV.
• The report notes the risk of a lack of liquidity in the market for the Funds shares or underlying investments.
• The report notes the risk of counterparty default and the potential for losses due to the failure of clearing brokers or other service providers.
• The report notes the risk of cyberattacks and other information security breaches.
• The report notes the risk of regulatory changes that could impact the Funds operations.
• The report notes the risk of conflicts of interest between the Sponsor and the Funds.
• The report notes the risk of the Funds reliance on a small number of key personnel.
• The report notes the risk of market volatility and illiquidity in the commodity and cryptocurrency markets.
• The report notes the risk of the Funds being subject to position limits and accountability levels set by the CFTC and the exchanges.
• The report notes the risk of the Funds being subject to the risks of trading in international markets.
• The report notes the risk of the Funds being treated as partnerships for U.S. federal income tax purposes, which may result in a lack of certainty as to tax treatment for an investors gains and losses.

Future Outlook

This filing includes forward-looking statements which generally relate to future events or future performance. These statements are only predictions. Actual events or results may differ materially. These statements are based upon certain assumptions and analyses the Sponsor has made based on its perception of historical trends, current conditions and expected future developments, as well as other factors appropriate in the circumstances. Whether or not actual results and developments will conform to the Sponsors expectations and predictions, however, is subject to a number of risks and uncertainties.

Management Comments

• The Sponsor has no ability to discern when current high levels of volatility will subside.
• The Sponsor employs a neutral investment strategy intended to track the changes in the Benchmark of each Fund regardless of whether the Benchmark goes up or goes down.

Industry Context

The report provides context on the competitive environment, noting that investors may choose among several options when considering an investment in agricultural commodities, including direct investment in commodity futures, commodity index funds, and exchange-traded notes.

Comparison to Industry Standards

• The report does not provide specific comparisons to industry standards, but it does note that the Funds are designed to offer liquidity, transparency, and capacity in single-commodity investing for a variety of investors.
• The report notes that the Funds have also been designed to mitigate the impacts of contango and backwardation, situations that can occur in the course of commodity trading which can affect the potential returns to investors.
• The report notes that the Funds seek to earn interest and other income from cash equivalents that it purchases and, on the cash they hold through the Custodian or other financial institutions.

Legal Proceedings

• The report discusses ongoing litigation involving the Sponsor and its former officers and members, including a books and records action and a subsequent lawsuit in New York Supreme Court, which was dismissed without prejudice to the case being refiled after the conclusion of the Gilbertie case in Delaware Court of Chancery.
• The report notes that a new suit was filed in the Delaware Court of Chancery against the Sponsors officers and certain of the Sponsors members, which was consolidated with the Gilbertie case.
• The report notes that the Court of Chancery ruled that the Rikers are entitled to advancement of legal fees and costs, and the Company has paid a total of $2,180,464, including interest.
• The report notes that the Court ruled that it would grant the motion to voluntarily dismiss the plaintiffs claims, without any of the conditions that the Rikers had requested.
• The report notes that the Court granted the motion terminating advancement obligations.

Related Party Transactions

• The report discloses that a portion of the aggregate common expenses of the Funds is related to the Sponsor or related parties of principals of the Sponsor.
• The report notes that the Funds pay a management fee to the Sponsor, and that the Sponsor may elect to waive the management fee for any Fund.
• The report notes that the Sponsor pays all of the routine operational, administrative and other ordinary expenses of the Fund, generally as determined by the Sponsor.

Stakeholder Impact

• Shareholders may experience losses on their investments in the Fund as a result of changes to investment objectives, benchmarks, or investment strategies.
• Shareholders may be required to pay U.S. federal income tax and, in some cases, state, local, or foreign income tax, on their allocable share of the Funds taxable income, without regard to whether they receive distributions or the amount of any distributions.
• Shareholders may not be able to sell their shares at a market price relatively close to the NAV if there is not a liquid market for the shares.
• Shareholders may be subject to the risk of a complete loss of a Funds assets held by the Custodian or the Financial Institution, which, at any given time, would likely comprise a substantial portion of a Funds total assets.
• Shareholders may be subject to the risk of the failure of, or delay in performance by, any exchanges and markets and their clearing organizations, if any, on which Commodity Interests are traded.
• Shareholders may be subject to the risk of nonperformance by the counterparties to the over the counter contracts.
• Shareholders may be subject to the risk of a cyberattack or other information security breach.
• Shareholders may be subject to the risk of a suspension or rejection of redemption orders.
• Shareholders may be subject to the risk of a change in the Funds management.
• Shareholders may be subject to the risk of the Funds termination.
• Shareholders may be subject to the risk of the Funds shares trading at a premium or discount to NAV.
• Shareholders may be subject to the risk of the Funds shares being delisted from the NYSE Arca.

Key Dates

Keywords

commodity futures, bitcoin futures, exchange-traded funds, agricultural commodities, corn, soybeans, sugar, wheat, cryptocurrency, derivatives, investment strategy, financial reporting, risk management, market outlook