Despite market volatility that can easily see corn and soybean prices swing 30-60¢ a day, February’s projected 2013 soybean-to-corn price ratio is only slightly higher than for 2012. Gary Schnitkey, University of Illinois economist, says based on futures settlement prices the first half of February, the projected price for corn will be $5.73/bu. The soybean price is pegged at $13.01/bu. That equates to a soybean-to-corn price ratio of 2.27 ($13.01 / $5.73).
Those numbers are at or near what will be used to set crop price insurance guarantees. And they’re slightly higher than 2012 insurance levels of $5.68 for corn and $12.55 for beans.
The 2.27 ratio is below the long-term, beans-to-corn ratio of 2.32 from 1975 through 2012. However, the 2013 ratio is near the 2007-2012 average ratio of 2.22. That suggests that 2013 prices slightly favor soybean production.
Ed Usset, University of Minnesota grain marketing economist, notes that higher corn yield potential often has growers lean more toward corn, despite the ratio. “It’s all about gross returns per acre,” he says, “and corn yields have gone up much faster than soybean yields.”
Schnitkey says there is a positive correlation of 0.30 between projected and harvest price ratios. “Lower projected soybean-to-corn ratios tend to be associated with lower harvest price ratios,” he says. “However, the correlation is not strong. A low-projected price does not always result in a low harvest ratio.
“For example, the 2007 projected soybean-to-corn price ratio of 1.99 was very low. But the 2007 harvest price ratio of 2.72 was above average. For the four years with price ratios below 2.0 (1976, 2001, 2002 and 2007), the harvest price ratio averaged 2.35, above the 2.32 average of projected ratios from 1975 through 2012.”
He adds that the low correlation calls into question whether growers base planting intentions too often on the current prices and ratio. “Often, price relationships change between spring and fall, altering final income from crops,” he says. “Longer-run rotational considerations likely should play a large role in planting decisions.”
Early 2013 planting expectations were outlined Thursday by Joseph Glauber, USDA chief economist, during USDA’s 89th Agricultural Outlook Forum. He projected corn planted acres at 96.5 million, a 0.7% drop from 2012. His soybean projections were for 77.5 million acres, up 0.4% from last year.
Of course, actual harvested acres could be much different. And prices could be much higher or much lower for each crop. Solid snow across most of the Corn Belt has provided some needed moisture for drought-stricken fields.
Some climatologists have projected normal central belt precipitation patterns for the spring and summer. Others have forecast more drought. Harvest time corn price forecasts range from below $4 to more than $8.
That indicates growers should have marketing in mind if there are opportunities to secure a solid profit on some of their corn or beans. And planting intensions for each farm may vary because of individual input costs and overall financial situation.