Two new exchange-traded notes (ETNs) give investors the opportunity to cash in on crops that have risen to record price levels. The MLCX Grains Elements (AMEX: GRU) and MLCX Biofuels Elements (AMEX: FUE) came to market earlier this month, both providing exposure to key global grains tied to biofuels.

A hot sector
Biofuels have been touted as a replacement for petroleum and as a low-carbon energy source. The resulting demand for grains to be used as both food and fuel has pushed their prices up substantially over the past two years.

Not everyone thinks that using food for fuel is a good idea. The carbon-saving benefits of biofuels have been increasingly questioned, with a new study by The Nature Conservancy and the University of Minnesota concluding that many biofuels emit more greenhouse gases than the fossil fuels they replace.

Yet even with the problems that biofuels bring to the climate change controversy, until the scientific disputes are resolved, biofuels will likely continue to be part of the solution.

Fund

Inception Date

Expense Ratio

Net Assets

MLCX Biofuels

2/5/08

0.75%

$4.2 million

MLCX Grains

2/5/08

0.75%

$3.9 million

Exchange-traded notes are similar to ETFs, but they're specifically designed to work within commodity markets. ETNs trade on exchanges just as ETFs do, but because they are structured like debt, it's important to know the issuer. Both MLCX securities are issued by AB Svensk Ekportkredit, which was founded in 1962 and is owned by the Swedish government.

The MLCX notes are each linked to a corresponding index. The MLCX Biofuels Index tracks futures contracts on seven agricultural commodities used in biofuels production, the most significant of which are soybeans, sugar, and corn. The MLCX Grains Index, on the other hand, tracks four different types of grains, with wheat and corn making up more than 80% of the index. Of these commodities, only wheat is not typically used for to produce biofuels.

Should you buy them?
Both of these ETNs face risks. Commodities can be extremely volatile, and these notes concentrate your investment heavily into futures contracts. In addition, ETNs are subject to the risk of the issuer having financial problems.

In addition, there is an ongoing question about how ETNs should be taxed. Issuers argue that ETNs should get preferential tax treatment from the way they're structured. But the IRS is considering changes that would remove the preference, so investors will have to keep an eye out for developments.

Because commodities are a separate asset class from stocks and bonds, they can provide some diversification benefits to your portfolio. Given their volatility, commodities should usually consist of only a small portion of an investor's portfolio. It will be interesting to see whether these funds become as popular as the biofuel craze itself.

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Fool contributor Zoe Van Schyndel lives in Miami and enjoys the sunshine and variety of the Magic City. She does not own any of the funds or securities mentioned in this article. The Motley Fool has a disclosure policy.