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.