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Derivative Instruments and Hedging Activities (Trust)
 3 Months Ended
Mar. 31, 2016
Teucrium Commodity Trust [Member]  
Derivative Instruments and Hedging Activities

Note 5 – Derivative Instruments and Hedging Activities

In the normal course of business, the Funds utilize derivative contracts in connection with its proprietary trading activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The Funds' derivative activities and exposure to derivative contracts are classified by the following primary underlying risks: interest rate, credit, commodity price, and equity price risks. In addition to its primary underlying risks, the Funds are also subject to additional counterparty risk due to inability of its counterparties to meet the terms of their contracts. For the three months ended March 31, 2016 and 2015, the Funds invested only in commodity futures contracts specifically related to each Fund.

 

Futures Contracts

The Funds are subject to commodity price risk in the normal course of pursuing their investment objectives. A futures contract represents a commitment for the future purchase or sale of an asset at a specified price on a specified date.

The purchase and sale of futures contracts requires margin deposits with a FCM. Subsequent payments (variation margin) are made or received by each Fund each day, depending on the daily fluctuations in the value of the contract, and are recorded as unrealized gains or losses by each Fund. Futures contracts may reduce the Funds' exposure to counterparty risk since futures contracts are exchange-traded; and the exchange's clearinghouse, as the counterparty to all exchange-traded futures, guarantees the futures against default.

The Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM's proprietary activities. A customer's cash and other equity deposited with an FCM are considered commingled with all other customer funds subject to the FCM's segregation requirements. In the event of an FCM's insolvency, recovery may be limited to each Fund's pro rata share of segregated customer funds available. It is possible that the recovery amount could be less than the total of cash and other equity deposited.

 

 

The following table discloses information about offsetting assets and liabilities presented in the statements of assets and liabilities to enable users of these financial statements to evaluate the effect or potential effect of netting arrangements for recognized assets and liabilities. These recognized assets and liabilities are presented as defined in the Financial Accounting Standards Board's (“FASB”) Accounting Standards Update (“ASU”) No. 2011-11 “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” and subsequently clarified in FASB ASU 2013-01 “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.”


The following table also identifies the fair value amounts of derivative instruments included in the statements of assets and liabilities as derivative contracts, categorized by primary underlying risk and held by the FCM, ED&F Man as of March 31, 2016 and December 31, 2015. 

 

Offsetting of Financial Assets and Derivative Assets as of March 31, 2016

    (i)     (ii)     (iii) = (i) – (ii)     (iv)     (v) = (iii) – (iv)  
                                 
                      Gross Amount Not Offset in the          
                      Statement of Assets and
Liabilities		          
          Gross Amount     Net Amount                      
          Offset in the     Presented in the                      
    Gross Amount     Statement of     Statement of                      
    of Recognized     Assets and     Assets and     Futures Contracts      Collateral, Due          
Description    Assets     Liabilities     Liabilities     Available for Offset     to Broker     Net Amount  
Commodity price                                                
   Soybean futures contracts   $ 148,363     $ -     $ 148,363     $ 26,225
  $ -     $ 122,138  
   Sugar futures contracts     361,581       -       361,581       -       62,786       298,795  

 

Offsetting of Financial Liabilities and Derivative Liabilities as of March 31, 2016

    (i)     (ii)     (iii) = (i) – (ii)     (iv)     (v) = (iii) – (iv)  
                                     
                      Gross Amount Not Offset in the        
                      Statement of Assets and
Liabilities		        
          Gross Amount     Net Amount                    
          Offset in the     Presented in the                    
    Gross Amount     Statement of     Statement of                    
    of Recognized     Assets and     Assets and     Futures Contracts      Collateral, Due        
Description    Liabilities     Liabilities     Liabilities     Available for Offset     from Broker     Net Amount  
Commodity price                                                
   Corn futures contracts   $ 4,060,650     $ -     $ 4,060,650     $ -     $ 4,060,650     $ -  
   Soybean futures contracts     26,225       -       26,225       26,225       -       -  
Wheat futures contracts     1,527,475       -       1,527,475       -       1,527,475       -  

 

Offsetting of Financial Assets and Derivative Assets as of December 31, 2015

    (i)     (ii)     (iii) = (i) – (ii)     (iv)     (v) = (iii) – (iv)  
                                     
                      Gross Amount Not Offset in the        
                      Statement of Assets and
Liabilities		        
          Gross Amount     Net Amount                    
          Offset in the     Presented in the                    
    Gross Amount     Statement of     Statement of                    
    of Recognized     Assets and     Assets and     Futures Contracts      Collateral, Due        
Description    Assets     Liabilities     Liabilities     Available for Offset     to Broker     Net Amount  
Commodity price                                                
   Soybean futures contracts   $ 16,175     $ -     $ 16,175     $ 16,175     $ -     $ -  
   Sugar futures contracts     364,056       -       364,056       -       -       364,056  

 

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2015

    (i)     (ii)     (iii) = (i) – (ii)     (iv)     (v) = (iii) – (iv)  
                                     
                      Gross Amount Not Offset in the        
                      Statement of Assets and
Liabilities		        
          Gross Amount     Net Amount                    
          Offset in the     Presented in the                    
    Gross Amount     Statement of     Statement of                    
    of Recognized     Assets and     Assets and     Futures Contracts      Collateral, Due        
Description    Liabilities     Liabilities     Liabilities     Available for Offset     from Broker     Net Amount  
Commodity price                                                
   Corn futures contracts   $ 3,908,550     $ -     $ 3,908,550     $ -     $ 3,908,550     $ -  
   Soybean futures contracts     238,662       -       238,662       16,175       222,487       -  
   Wheat futures contracts     1,924,464       -       1,924,464       -       1,924,464       -  

 

The following is a summary of realized and unrealized gains (losses) of the derivative instruments utilized by the Trust:

 

Three months ended March 31, 2016

    Realized (Loss) Gain on     Net Change in Unrealized Appreciation or  
Primary Underlying Risk   Commodity Futures Contracts
     Depreciation on Commodity Futures Contracts
  
Commodity price                
Corn futures contracts   $ (2,091,875 )    $ (152,100 )
Soybean futures contracts     100,325       344,625  
Sugar futures contracts     (1,758 )      (2,475 ) 
Wheat futures contracts     (569,113 )      396,989  
Total commodity futures contracts   $ (2,562,421 )    $ 587,039

 

Three months ended March 31, 2015

    Realized Gain (Loss) on     Net Change in Unrealized Appreciation or  
Primary Underlying Risk   Commodity Futures Contracts     Depreciation on Commodity Futures Contracts  
Commodity price                
Corn futures contracts   $ 401,862   $ (6,052,825 )
Soybean futures contracts     (583,375 )      56,938
Sugar futures contracts     (333,547 )     (218,411 )
Wheat futures contracts     (707,238 )     (2,189,151 )
Total commodity futures contracts   $ (1,222,298 )   $ (8,403,449 )

 

Volume of Derivative Activities

 

The average notional market value categorized by primary underlying risk for all futures contracts held was $96.8 million for the three months ended March 31, 2016 and $116.3 million for three months ended March 31, 2015.