Note 5 - Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

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 the inability of its counterparties to meet the terms of their contracts. For the three and six months ended June 30, 2023 and year ended December 31, 2022, the Funds invested only in commodity and cryptocurrency futures contracts specifically related to each Fund.

Futures Contracts

The Funds are subject to commodity and cryptocurrency 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 an 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 combined 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 combined statements of assets and liabilities as derivative contracts, categorized by primary underlying risk, and held by the FCMs, Marex, and StoneX as of June 30, 2023, and December 31, 2022. The DEFI Fund has an account open at Phillip Capital with no contracts held as of June 30, 2023.

*The amount of collateral presented in Collateral, Due from Broker, is limited to the liability for the futures contracts and accordingly does not include the excess collateral pledged.

Offsetting of Financial Assets and Derivative Assets as of June 30, 2023
	(i)		(ii)		(iii) = (i-ii)		(iv)				(v) = (iii)-(iv)
							Gross Amount Not Offset in the Statement of Assets and Liabilities
Description	Gross Amount of Recognized Assets		Gross Amount Offset in the Statement of Assets and Liabilities		Net Amount Presented in the Statement of Assets and Liabilities		Futures Contracts Available for Offset		Collateral, Due to Broker		Net Amount
Commodity and Cryptocurrency Price
Soybean futures contracts	$	818,350	$	-	$	818,350	$	685,954	$	-	$	132,396
Sugar futures contracts	$	921,870	$	-	$	921,870	$	97,357	$	-	$	824,513
Bitcoin futures contracts	$	126,672	$	-	$	126,672	$	-	$	-	$	126,672

Offsetting of Financial Liabilities and Derivative Liabilities as of June 30, 2023
	(i)		(ii)		(iii) = (i-ii)		(iv)				(v) = (iii)-(iv)
							Gross Amount Not Offset in the Statement of Assets and Liabilities
Description	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Statement of Assets and Liabilities		Net Amount Presented in the Statement of Assets and Liabilities		Futures Contracts Available for Offset		Collateral, Due from Broker*		Net Amount
Commodity and Cryptocurrency Price
Corn futures contracts	$	13,427,593	$	-	$	13,427,593	$	-	$	13,427,593	$	-
Soybean futures contracts	$	685,954	$	-	$	685,954	$	685,954	$	-	$	-
Sugar futures contracts	$	97,357	$	-	$	97,357	$	97,357	$	-	$	-
Wheat futures contracts	$	23,351,829	$	-	$	23,351,829	$	-	$	23,351,829	$	-

Offsetting of Financial Assets and Derivative Assets as of December 31, 2022
	(i)		(ii)		(iii) = (i-ii)		(iv)				(v) = (iii)-(iv)
							Gross Amount Not Offset in the Statement of Assets and Liabilities
Description	Gross Amount of Recognized Assets		Gross Amount Offset in the Statement of Assets and Liabilities		Net Amount Presented in the Statement of Assets and Liabilities		Futures Contracts Available for Offset		Collateral, Due to Broker		Net Amount
Commodity and Cryptocurrency Price
Corn futures contracts	$	1,585,798	$	-	$	1,585,798	$	1,585,798	$	-	$	-
Soybean futures contracts	$	2,520,370	$	-	$	2,520,370	$	-	$	-	$	2,520,370
Sugar futures contracts	$	911,329	$	-	$	911,329	$	85,128	$	-	$	826,201
Wheat futures contracts	$	3,160,732	$	-	$	3,160,732	$	3,160,732	$	-	$	-
Bitcoin futures contracts	$	29,152	$	-	$	29,152	$	-	$	-	$	29,152

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2022
	(i)		(ii)		(iii) = (i-ii)		(iv)				(v) = (iii)-(iv)
							Gross Amount Not Offset in the Statement of Assets and Liabilities
Description	Gross Amount of Recognized Liabilities		Gross Amount Offset in the Statement of Assets and Liabilities		Net Amount Presented in the Statement of Assets and Liabilities		Futures Contracts Available for Offset		Collateral, Due from Broker*		Net Amount
Commodity and Cryptocurrency Price
Corn futures contracts	$	2,967,103	$	-	$	2,967,103	$	1,585,798	$	1,381,305	$	-
Sugar futures contracts	$	85,128	$	-	$	85,128	$	85,128	$	-	$	-
Wheat futures contracts	$	26,380,838	$	-	$	26,380,838	$	3,160,732	$	23,220,106	$	-

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

Three months ended June 30, 2023 

	Realized (Loss) Gain on Commodity Futures Contracts			Net Change in Unrealized (Depreciation) Appreciation on Commodity Futures Contracts
Commodity Price
Corn futures contracts	$	(5,192,445	)	$	(8,746,928	)
Soybeans futures contracts		(1,108,023	)		1,311,668
Sugar futures contracts		7,408,174			(3,141,505	)
Wheat futures contracts		(17,129,061	)		1,960,839
Bitcoin futures Contracts		71,236			(30,948	)
Total commodity and cryptocurrency futures contracts	$	(15,950,119	)	$	(8,646,874	)

Three months ended June 30, 2022

	Realized Gain on Commodity Futures Contracts		Net Change in Unrealized Depreciation on Commodity Futures Contracts
Commodity Price
Corn futures contracts	$	22,454,084	$	(47,449,038	)
Soybeans futures contracts		2,645,146		(2,827,976	)
Sugar futures contracts		401,262		(2,174,684	)
Wheat futures contracts		1,412,938		(60,209,162	)
Total commodity futures contracts	$	26,913,430	$	(112,660,860	)

Six months ended June 30, 2023

	Realized (Loss) Gain on Commodity Futures Contracts			Net Change in Unrealized (Depreciation) Appreciation on Commodity Futures Contracts
Commodity Price
Corn futures contracts	$	(11,461,380	)	$	(12,046,288	)
Soybeans futures contracts		(40,479	)		(2,387,974	)
Sugar futures contracts		8,747,622			(1,688	)
Wheat futures contracts		(40,487,794	)		(131,723	)
Bitcoin futures Contracts		700,787			97,520
Total commodity and cryptocurrency futures contracts	$	(42,541,244	)	$	(14,470,153	)

Six months ended June 30, 2022

	Realized Gain on Commodity Futures Contracts		Net Change in Unrealized Depreciation on Commodity Futures Contracts
Commodity Price
Corn futures contracts	$	39,023,065	$	(27,554,708	)
Soybeans futures contracts		9,697,847		(1,913,259	)
Sugar futures contracts		471,423		(1,266,942	)
Wheat futures contracts		39,419,505		(97,060,524	)
Total commodity and cryptocurrency futures contracts	$	88,611,840	$	(127,795,433	)

Volume of Derivative Activities

The average notional market value categorized by primary underlying risk for the futures contracts held was $324.9 million and $353.6 million respectively for the three and six months ended June 30, 2023 and $902.8 million and $690.9 million respectively for the three and six months ended June 30, 2022.