Forget Corn, Is Soy Poised For Lift-Off?

Tyler Durden's picture

By now everyone is aware of the silver-like surge in corn prices over the past month, driven by the recognition that what is quickly becoming the most severe drought in US history is here to stay indefinitely longer as elusive rainfall remains just that. As can been seen on the chart below, corn prices have risen by 54% since mid-June. What may come as a surprise is that another critical commodity - Soybeans - has only risen by half as much, or just 28% in the past month. Why "only"? Because as the following two charts from Morgan Stanley show, the fundamental picture for soybeans may be just as bad if not worse as corn, which would mean there is far more price upside in soy in the coming days, especially if strategies based on prayer, for either central bank intervention or rain, remain unasnwered.

First, a relative comparison of corn vs soybeans:

And now, here is what the Corn crop looks like compared to Soybeans: what may come as shock is that percentage of soybeans rated in "good or excellent" condition is even less than corn.

From an inventory standpoint, soy is actually worse than corn. Which means the squeeze may be on even sooner: as a reminder, the US is the world's biggest producer and consumer of soybean. Well, in 2012 it may just be consumer.

Finally, if soybean meal is also about to join corn in the parabolic department, one can just as easily expect downstream protein derivatives to not be long in joining the moonshot party, coupled with margins of unhedged fast food stores collapsing into negative territory in no time.

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Zola's picture

Why doesn't Bernanke print more rain ?? After all i thought the central banks were Gods ? Aren't the politicial midgets all praying on the altar of this divinity day in day out ?

TrustWho's picture

Exactly...Bernanke is the Wizard of Oz and the lack of rain may pull his curtain.

krispkritter's picture

What he's really 'growing' is Soylent Green. Greenbacks made from the sacrifice of labor and savings of the Muppets. Oh what I'd give to have a tree chipper and a lunchdate with Benny Boy...'...he put his chips ALL IN!...'

francis_sawyer's picture

Maybe this is natures way of saying FUCK YOU to the US Navy's ideas of going to biofuels...

Precious's picture

The Japanese have invented GMO plankton that's going to produce so many ocean fish they're going to be jumping straight into the boat.  

I swear I've seen it.

zhandax's picture

The Japanese have invented GMO plankton that's going to produce so many ocean fish they're going to be jumping straight into the boat. 

Yeah; available in 8 glow-in-the-dark colors!

old naughty's picture

Where are they growing these? FukuXXXma?

Comay Mierda's picture

MS trying to offload their long soybean positions, they are full of shit

look at this chart:$SOYB&p=W&yr=2&mn=0&dy=0&id=p99044456386

everytime RSI(14) is above 70 soybean spot either stops its rise or gets smacked down

now look where RSI(14) is

MS going for a muppet play

quebecgold's picture

What about Feeder Caddle? It went down about 15% in the last month while production cost involving corn and soybean meal went up. You guys think the price off feeder caddle will go up to reflect high grains price?

Xanadu_doo's picture

Between high-high-higher grain prices and increased regulation (thanks, HSUS fuckers), many livestock proiducers are just selling out. Prices for farmers won't raise that much because of cost of production, but food inflation wwill continue.

engineertheeconomy's picture

The curve is going parabolic for sure, it won't be long now








nmewn's picture

At 26 bucks a gallon I'm on Gaia's side here.

I anxiously await the latest "green crony" excuse for this taxpayer rip off.


The Monkey's picture

Looks like we could get another blow off top in at least soft commodities. Along with crude, makes a great long hedge against short equity positions for the "monetary madness daze" ahead.

Let's print!

Raymond_K_Hessel's picture

What this article fails to mention is that corn is higher than soy because the damage has already been done to the corn crop, while if we get rain in August, most of the soy crop will make it. If it rains in aug, soy plummets. If not, we have a real mess on our hands, as this article suggests.

cbxer55's picture

Looks like we need old Wile E. Coyote to do one of his rain dances.

See around the 4:20 mark.

Muppet of the Universe's picture

CORN is a C4 plant.  It retains the sugars it creates even when it lacks water. 

CAM plants, or C3 plants, consume their own sugars to stay alive when they have no water.


Corn can survive droughts b/c corn is a C4 plant.


WHEAT & SOY are C3/CAM plants.


EXPECT Wheat and SOY to die off in MASS QUANTITY as this multidecade level 4 & 5 drought continues, worsens, and spreads.

Expect Corn to be LESS AFFECTED by the drought, b/c corn is genetically drought resistant. 

Therefore, expect the correlation between the two to change in coming months.

Expect wild fires caused by drought to pose considerable risk to all agricultural products.

Climate Change WILL have an effect on agricultural output, and therefore, food prices.

Expect continued wild and out of control prices in agricultural commodities, etfs, and etns.


BOOYAKASHA.  Biology major became a drop-out wall street trader...

LawsofPhysics's picture

Wrong. All the "C4" means is that corn has an additional pathway for converting carbon dioxide into sugar. ALL plants consume their sugars when there is no light. Corn just makes a lot more a lot faster. By the way, soybeans have the advantage of associating with nitrogen fixing bacteria. I can see why you dropped out but I hope you are right. We put in over 10,000 acres of soybeans this year. Bring it. Oh yeah, I accept gold.

Precious's picture

My magic 8-Ball begs to differ.

wisefool's picture

What about the old saying that corn will sacrifice the plant to save the ear, beans will sacrifice the seed to save the plant?

I am not an expert, but thats what I've heard and seen. doesn't the bean plant "think" it can re-bloom later, where the corm plant knows it is one and done?

Muppet of the Universe's picture

Yo Marshal Davidson Hatch!

Water-use efficiency is relative to carbon fixation strategies.

What up son?

C3 plants, accounting for more than 95% of earth's plant species, use rubisco to make a three-carbon compound as the first stable product of carbon fixation. C3 plants flourish in cool, wet, and cloudy climates, where light levels may be low, because the metabolic pathway is more energy efficient, and if water is plentiful, the stomata can stay open and let in more carbon dioxide. However, carbon losses through photorespiration are high.

C4 plants possess biochemical and anatomical mechanisms to raise the intercellular carbon dioxide concentration at the site of fixation, and this reduces, and sometimes eliminates, carbon losses by photorespiration. C4 plants, which inhabit hot, dry evironments, have very high water-use efficiency, so that there can be up to twice as much photosynthesis per gram of water as in C3 plants, but C4 metabolism is inefficient in shady or cool environments. Less than 1% of earth's plant species can be classified as C4.

Read more: :/ Although for the record.  I got the cam c3 thing totally mixed up.
disabledvet's picture

Gold for soybeans? WTF???? Really? If we have want relative to friggin soybeans it is by choice not because of need. To compare soybeans to gold is a RIPOFF. We have no drought here. Corn, soybeans, cows...even the gophers are having a good time. Simply "does not compute." a drought of this scale is bad for all. All lose as cash settlement and ultimately price becomes the final arbiter of the trade. This means the bankers win!

Disenchanted's picture



Most winter wheat has already been harvested...and winter wheat is about 3/4 of US wheat production.


Urban Roman's picture

CAM is a whole nother thing. Crassulacean Acid Metabolism.

It's a thing succulents do. They close their little pores in the daytime and conduct photosynthesis using carbon that they captured the previous night. At night the little pores in the leaves open up and take in CO2 when the water loss is not so bad. To do this, they have to burn some sugar, but not release the CO2, which builds up as (maleic?) acid in the leaves.

The drought is good news for purslane. For corn and soybeans, not so much.

Muppet of the Universe's picture

yea I just realized that...  my bad :(

I majored in human A&P :(  not plant metabolism :|

Xanadu_doo's picture

Indeed wrong. Corn will not recover even if we get rain in the Midwest. It is gone in many places and farmers have lost hope for this season. In fact, many corn farmers in Ill. already are plowing under their corn and calling the season a loss -- some others are cutting the scrabbly corn for animal silage before it loses all value (next week or two w/o rain). If we get adequate rain through the end of the season, soybeans WILL come back. It won't ever be a bumper crop - too much yield potential already gone - but better than plowing it under. Soybeans bloom much longer and are much more resilient overall. While many modern corn hybrids are drought TOLERANT, they are not drought RESISTANT.

mrdenis's picture

Green Shoots up 

Aguadulce's picture

If u guys actually want a good trade check out yc/ysb ratio during planting season this year. It had to go to 2.5 for beans to gain any more of the maginal acres from corn. Sx13/cz13 is down near 2.0 and MUST go to 2.5 to rebalance the soybean snd. This article is correct in the fact that the soy snd is far tighter than corn and something has to happen to the grain ratios to even it out.

Free Markets's picture

Beans still have a chance for good production. Corn does not. Supply will. BE way out of balance thus throwing the curve.

d edwards's picture

IMHO, corn has spiked because the dumb asses in DC are having it made into ethanol, which if you figure in all the petroleum used in it's production, is a HUGE loser. Can't exist w/o subsidies.

Turn corn into beef and taco shells-forget ethanol.

DOT's picture

Must be my lying eyes.

I have inspected crops in 6 States.  Yields will be way down.

Sutton's picture

Will Ben raise rates to squash hedge fund hoarding of the world's foodstuffs? He may have to, to let the small of the world eat.

The Monkey's picture

Real rates will rise by themselves after a time. Monetary policy moves prices further up the trendline until, well, it can't.

I love blow off tops.

Amish Hacker's picture

What makes you think "letting the small of the world eat" is one of his goals?

buzzsaw99's picture

MON doesn't have a genetically modified drought proof bean yet?

krispkritter's picture

My research says that 80-90% of US soybeans are GMO. So all my Vegan relatives swearing by the health benefits of a soy-based diet, along with plenty of pesticide-laced veggies, are probably not going to outlive me on a paleo diet of my own greenhouse grown tilapia, veggies, and grass-fed beef...of course, reading ZH tends to raise the BP...Where's HH?

slewie the pi-rat's picture



i don't care if it's damp or dewy
long as i got my plastic slewie
sittin on the dashboard of my caaarrr...

zhandax's picture

Though I know it's loosing power
getting weaker by the hour
falling off the dashboard of my carrrrrr....

slewie the pi-rat's picture

with optional vasectomy, plastic fantastic dashboard slewie is genetically modified, BiCheZ!

AUD's picture

Yeah, well, apparently the world didn't end in 1988 either.

There was however quite the parabolic runup in commodity prices, before a huge credit bust in 1989.

Very similar in fact to 2008.

RRat's picture

One big difference is the ethanol mandate, which creates a huge government mandated demand for corn. The demand for soybeans is mostly free market, and therefore more price-elastic.



radicall's picture

Already wrote to my Senators/CongressPerson to get rid of the mandate at least for the year. Maybe they will see the light?

It takes 26 pounds of corn to make a gallon of ethanol. (although the remaining product called DDG is still used as a feed). That is a lot of Corn!

wisefool's picture

It also takes something like 8 gallons of water to make one gallon of fuel.

As far as the mandate, the debate has under currents that many people don't fully understand. I am not saying I do either. But the 'just of it I got is that farmers want to export a refined good, instead of just raw commodity. The local/regional ethanol plants provide jobs in the area. Most of the small-mid sized farmers I know have salaried jobs off the farm when not harvesting, planting, hauling or spraying. Or their spouse/kids do. Ethanol provides both the jobs and mark-up.

Same issue was part of the revolution, and the civil wars - of many countries - not just america. If those red states start getting angry, everybody goes hungry. like in wiemar germany.

zhandax's picture

Well these red states are hell and beyond angry but I doubt that causes anyone to go hungry because ADM, Cargill, and the like either own or lease the production and they are all over beans, corn, and wheat like stink on shit.

Aguadulce's picture

Amen to that. Ethanol was invented to create demand for an oversupplied grain. We use 3x more corn for ethanol than we export. Shut er down and $2 corn is back.

Seize Mars's picture

Comparing today's conditions to those of years gone by is not possible. Most farms nowadays are using newer strains that are ridiculously resilient.

Also, realize that soy plants are fucking epically more hardy than corn.

Just sayin'.

zhandax's picture

Keep in mind that the big selling point for GMO is the farmer can use Round Up to kill the weeds without slowing the GMO crop down.