Derivative Instruments and Hedging Activities (Teucrium Commodity Trust [Member])

9 Months Ended

Sep. 30, 2013

Teucrium Commodity Trust [Member]

Derivative Instruments and Hedging Activities

Note 4 - 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 nine months ended September 30, 2013, the Funds invested only in commodity futures contracts specifically related to each Fund. For the nine months ended September 30, 2012, the Funds invested only in commodity futures contracts and Cleared Swaps. Cleared Swaps have standardized terms similar to, and are priced by reference to, a corresponding Benchmark Component Futures Contract.  Additionally, Other Commodity Interests that do not have standardized terms and are not exchange-traded, referred to as "over-the-counter" Interests, can generally be structured as the parties to the Commodity Interest contract desire.  Therefore, each Fund might enter into multiple Cleared Swaps and/or over-the-counter Interests intended to exactly replicate the performance of each of the Benchmark Component Futures Contracts for the Fund, or a single over-the-counter Interest designed to replicate the performance of the Benchmark as a whole. Assuming that there is no default by a counterparty to an over-the-counter Interest, the performance of the Interest will not necessarily correlate exactly with the performance of the Benchmark or the applicable Benchmark Component Futures Contract.  

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 Futures Commission Merchant ("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 as of September 30, 2013 and December 31, 2012.

Offsetting of Financial Assets and Derivative Assets as of September 30, 2013

	(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		Financial		Cash Collateral
Description	Assets		Liabilities		Liabilities		Instruments		Received		Net Amount
Commodity price
WTI crude oil futures contracts	$	172,372	$	-	$	172,372	$	-	$	92,567	$	79,805
Soybean futures contracts		50,875		-		50,875		50,875		-		-
Sugar futures contracts		33,410		-		33,410		33,410		-		-
Wheat futures contracts		67,813		-		67,813		67,813		-		-

Offsetting of Financial Liabilities and Derivative Liabilities as of September 30, 2013

	(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		Financial		Cash Collateral
Description	Liabilities		Liabilities		Liabilities		Instruments		Pledged		Net Amount
Commodity price
Corn futures contracts	$	4,642,325	$	-	$	4,642,325	$	-	$	4,642,325	$	-
Natural gas futures contracts		94,030		-		94,030		-		94,030		-
Soybean futures contracts		307,313		-		307,313		50,875		256,438		-
Sugar futures contracts		34,933		-		34,933		33,410		1,523		-
Wheat futures contracts		294,963		-		294,963		67,813		227,150		-

Offsetting of Financial Assets and Derivative Assets as of December 31, 2012

	(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		Financial		Cash Collateral
Description	Assets		Liabilities		Liabilities		Instruments		Received		Net Amount
Commodity price
Natural gas futures contracts	$	9,550	$	-	$	9,550	$	9,550	$	-	$	-
WTI crude oil futures contracts		44,872		-		44,872		44,872		-		-
Soybean futures contracts		63,200		-		63,200		63,200		-		-
Wheat futures contracts		15,762		-		15,762		15,762		-		-

Offsetting of Financial Liabilities and Derivative Liabilities as of December 31, 2012

	(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		Financial		Cash Collateral
Description	Liabilities		Liabilities		Liabilities		Instruments		Pledged		Net Amount
Commodity price
Corn futures contracts	$	2,213,775	$	-	$	2,213,775	$	-	$	2,213,775	$	-
Natural gas futures contracts		233,919		-		233,919		9,550		224,369		-
WTI crude oil futures contracts		58,090		-		58,090		44,872		13,218		-
Soybean futures contracts		284,575		-		284,575		63,200		221,375		-
Sugar futures contracts		78,378		-		78,378		-		78,378		-
Wheat futures contracts		206,850		-		206,850		15,762		191,088		-

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

Three months ended September 30, 2013

	Realized (Loss) Gain on			Net Change in Unrealized (Loss)
Primary Underlying Risk	Derivative Instruments			Gain on Derivative Instruments
Commodity price
Corn futures contracts	$	(3,670,163	)	$	(1,818,600	)
Natural gas futures contracts		(125,490	)		65,830
WTI crude oil futures contracts		9,380			117,800
Soybean futures contracts		183,763			(188,626	)
Sugar futures contracts		(113,288	)		174,888
Wheat futures contracts		(513,650	)		480,925
Total commodity futures contracts	$	(4,229,448	)	$	(1,167,783	)

Three months ended September 30, 2012

	Realized Gain (Loss) on			Net Change in Unrealized (Loss)
Primary Underlying Risk	Derivative Instruments			Gain on Derivative Instruments
Commodity price
Corn futures contracts	$	16,718,359		$	(3,740,286	)
Natural gas futures contracts		(263,121	)		502,151
WTI crude oil futures contracts		-			119,260
Soybean futures contracts		719,250			(405,038	)
Sugar futures contracts		(80,068	)		661
Wheat futures contracts		585,687			(214,112	)
Total commodity futures contracts	$	17,680,107		$	(3,737,364	)

Nine months ended September 30, 2013

	Realized (Loss) Gain on			Net Change in Unrealized (Loss)
Primary Underlying Risk	Derivative Instruments			Gain on Derivative Instruments
Commodity price
Corn futures contracts	$	(7,350,776	)	$	(2,428,550	)
Natural gas futures contracts		(224,549	)		130,339
WTI crude oil futures contracts		(77,750	)		185,590
Soybean futures contracts		8,838			(35,063	)
Sugar futures contracts		(398,406	)		76,855
Wheat futures contracts		(1,270,025	)		(36,062	)
Total commodity futures contracts	$	(9,312,668	)	$	(2,106,891	)

Nine months ended September 30, 2012

	Realized Gain (Loss) on			Net Change in Unrealized Gain
Primary Underlying Risk	Derivative Instruments			(Loss) on Derivative Instruments
Commodity price
Corn futures contracts	$	12,326,540		$	978,790
Natural gas futures contracts		(831,009	)		832,228
WTI crude oil futures contracts		43,347			(167,247	)
Soybean futures contracts		797,231			(102,331	)
Sugar futures contracts		(676,378	)		77,875
Wheat futures contracts		121,465			174,236
Total commodity futures contracts	$	11,781,196		$	1,793,551

Volume of Derivative Activities

The notional amounts and number of contracts categorized by primary underlying risk are included in the schedule of investments as of September 30, 2013 and December 31, 2012.