Wheat or corn?

While I am long both, I am overweight corn due to its value relative to wheat.

Indeed, the corn-to-wheat ratio is now 1 standard deviation (σ) below its long-term tend, what suggests a relative cheapness of corn relative to wheat.

Below is an overview of corn’s performance relative to wheat under different scenarios:

• Return to -2σ: -17%

• Return to the trend: +37%

• Return to +1σ: +66%

• Return to +2σ: +87%

• Return to +3σ: +116%

Add to this the effect of fertilizer shortages, which will likely lead part of the corn production to be replace by wheat (less fertilizer intensive), and you get an idea of why I’ve overweighted it.

$CORN $SUGA