| CHICAGO, Sept 11
CHICAGO, Sept 11 Worry that a late-summer heat
wave in the U.S. Midwest is shrinking the soybean crop, boosting
the premium of soybean prices over corn, which should encourage
South American farmers to plant a bumper soy crop there, traders
The Chicago Board of Trade soy/corn ratio, or the price of
soy divided by corn, is a keystone annual reference point used
by farmers in the United States and South America to determine
profitability and allocate acres for planting each crop. To a
great extent, both hemisphere crops are also hedged at the CBOT.
This autumn, the message is clear for South American farmers
now ready to plant their 2013 crops. CBOT soybeans are trading
nearly three times the price of corn.
"The job of that spread is to remain inflated. We have
enough corn in the U.S., globally," said Rich Feltes, vice
president of commodity research for brokerage RJ O'Brien. "We
have a shortage of beans in the U.S. and we need to insure we
have ample production in South America.
"The job of the market is to shrink corn acres, buy more
soybean acres - not only in South America where it is already
doing the job but in the U.S. next year," Feltes said.
For decades, the United States was the No. 1 exporter and
producer of soybeans. This year Brazil exported more soybeans
than the United States, where the 2012 drought slashed supplies,
and in recent years Brazil and Argentina combined have produced
more soybeans than the United States.
Analysts differ on what point the ratio favors soybean
planting over corn, with opinions ranging from 2.2-2.5 to 1.
Above that level favors bean plantings while below that point
triggers corn seedings. Either way, the current ratio encourages
planting of soybeans.
On Thursday, the Nov/Dec 2013 soybean corn ratio closed at
was 2.87 to 1. The ratio is even more favorable in Brazil where
cash prices reflect a soy/corn ratio of 3 to 1 in Parana and up
to 4 to 1 in Mato Grosso, according to Michael Cordonnier, a
closely followed crop advisor who tracks South American
production and markets.
CBOT Nov soy/Dec corn price ratio soars:
"The record large safrinha corn crop in Brazil has pushed
down prices so much that not even a weaker currency or
government purchases of corn at the guaranteed minimum price of
R$13 per sack has been able to pull up prices. In Mato Grosso
there is still corn being sold for R$10 per sack, which is a
little less than US$2 per bushel depending on the currency
exchange rate," Cordonnier said in a letter to customers.
Soy planting in Mato Grosso, the largest Brazilian soy
state, officially starts on Sept. 15 and later in southern
areas, while corn planting began about a month ago. Planting
continues through December, with most occurring from October to
November. Argentina has a similar planting season.
While the 2013 CBOT Nov/Dec soy-corn price ratio soared to
new high of 2.97 this week, the 2014 May soy/corn is at 2.66 and
the 2014 Nov/Dec ratio is closer to 2.36.
"That is really screaming that the deferred November beans
really need to come up," said Feltes. "Even with lower corn
acres we're going to build corn stocks in 2015 with big corn
yields. We just need to continue shifting acres out of corn
Traders are bracing for another jolt in the spread on
Thursday when the U.S. Department of Agriculture will update its
2013 U.S. corn and soybean crop estimates. Private forecasters
expect the agency to cut its corn production estimate 1 percent
whereas the soy outlook could fall 3 percent, as the late summer
heat wave was seen hurting soy yields more than corn.
"You get the kind of yield reductions we're talking all of
the sudden you're at pipeline minimums for beans. You'll be far
from pipeline minimums for corn," said Tim Emslie, grains
research manager for CHS Inc CHSCP.O, the largest U.S. farm
cooperative and a major corn hedger.
Feltes said: "That's a ratio that's going to stay very firm