Column: CBOT soybeans bidding for 2023 U.S. acres in historic run-up versus corn
NAPERVILLE, Ill., Dec 21 (Reuters) - Many records and firsts occurred in global grain markets in 2022, and Chicago soybean futures are indirectly inking one to end the year, pleading their case to U.S. farmers for the upcoming planting season.
Multiple factors influence planting decisions, but the ratio of new-crop CBOT soybean futures versus corn is the broadest indicator of profitability potential. So far in December, that ratio is averaging 8% higher than in mid-October, the biggest move for that period in at least two decades.
However, that is more the result of falling corn futures, not necessarily rallying soybeans.
In mid-October, November 2023 soybean futures were trading 2.15 times higher than December 2023 corn , a 10-year low for the date and easily in “corn-favoring” territory. The ratio now hovers above 2.3 despite hitting a three-week low on Wednesday.
Historically, ratios below 2.3 are supportive of corn planting and soybeans dominate around 2.5 and above, but the middle can be gray. The U.S. Department of Agriculture recently slated 2023 corn acres at 92 million, up from 88.6 million this year.
Soybean plantings were seen at 87 million acres in 2023 versus 87.5 million in 2022. Projections were based on mid-October data.
Prices as of February should better dictate U.S. farmers’ 2023 planting intentions, but for now, corn’s supremacy has slipped. There is only one other recent case of a notable late-year strengthening of the new-crop futures ratio when it had been favoring corn: 2009. Unsurprisingly, bean acres were higher and corn acres lower than the earliest ideas that year.
The new-crop ratio last December averaged 2.28, slightly lower than in mid-October when USDA came up with its 92 million-acre corn and 87.5 million-acre bean outlook for 2022. But wild swings followed, as soybeans rallied in February on Brazil drought, shifting the ratio to 2.43.
USDA’s farmer survey in early March 2022 turned out 89.5 million corn and 91 million bean acres, shocking the market. But corn kept rallying as Russia’s late February invasion of Ukraine shut off corn exports.
By April, the ratio averaged 2.05 and was essentially screaming for corn, but wet weather delayed – and in some cases canceled – spring planting. But what would the true corn area have been in 2022 without the weather issues? Probably lower than USDA’s original forecast, in any case.
High corn production costs were likely the limiting factor outside of weather in 2022, and those will stick around in 2023. Corn may need to do more work to realize USDA’s latest 2023 scenario, which calls for the biggest annual percentage rise in corn acres in seven years.
U.S. corn export demand in the next month or two will have a strong hand in how futures trend. Sales and shipments have been very poor but could pick up as Brazil’s exports fade and Ukraine’s supplies remain limited.
Soybean futures should have a large Brazilian crop factored in for early 2023, while Argentina’s drought problems are well- known but could worsen in the coming weeks. A potential collapse in volatile soy products or poor demand from top buyer China could work against soybeans’ bid for U.S. acres in the near term.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
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