Mecklai graph: Outlook on corn, soybean

Mecklai graph of the day: Commodity cousins

As seen in the below chart, both Corn and Soybean prices walk together as they are considered cousins since start of 2011 and rallying sharply to peak in July 2012 as U.S. drought conditions widely spread which is the worst the United States has seen since 1988 or possibly even 1956

From the below graph it can be noticed that since the start of 2013 a surge is seen in the soybean prices and the corn prices continue to plunge. The fall in the corn prices can be attributed to higher than estimated US corn inventories and the slow planting of the corn  crop this season which was lagging due to cold and rain. However, the surge in the soy prices amid limited U.S. soybean supplies, labor unrest in Brazil which has prevented the normal flow of soybeans to foreign markets further compounding supply shortages  worldwide while lastly strong demand from the worlds largest importer China has send the prices back to near pre drought level.

Near-term tight supplies are supporting soybeans, while the planting progress is hurting corn and new crop soybeans. To plant new crop remains challenge but could provide some degree of support to prices but have quickly faded from the 2012 highs. Going ahead if we see good weather in June and new plantation of both commodities progress, we may witness further fall in prices, else reverse direction could be seen.

The below graph shows the prices of soybean and corn from 2011

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