Tuesday, February 19, 2013
150px_soybean_mature_pods_040902_115

2013 Soybean-to-Corn Price Ratio Projected Higher than 2012

AgFax.Com - Your Online Ag News Source


Based on settlement prices during the first half of February, the projected price for corn will be $5.73 per bushel for corn and $13.01 for soybeans, giving a soybean-to-corn price ratio of 2.27 (2.27 = $13.01 / $5.73).

The 2013 corn projected price will be near the 2012 projected price and the 2013 soybean projected price will be above the 2012 level. The 2.27 soybean-to-corn price ratio is slightly above the average of price ratios in recent years.




Projected Prices in 2013

Projected prices are used to set crop insurance guarantees. These prices are based on settlement prices of Chicago Mercantile Exchange (CME) contracts during the month of February. The December contract is used for corn and the November contract is used for soybeans. These projected prices will have large impacts on risks farmers face during 2013. Higher projected prices will cause crop insurance products to offer more downside risk protection.

During the first half of February, settlement prices would result in a $5.73 projected price for corn. This $5.73 price is near the $5.68 price level for 2012; hence, the 2013 projected price likely will provide similar protection to that offered in 2012.

During the first half of February, settlement prices would result in a $13.01 projected price for soybeans. This $13.01 projected price is $.46 higher than the 2012 projected price of $12.55. Hence, the 2013 price likely will provide more risk protection for soybeans than the 2012 projected price.

Price Ratios

Market prices provide some guidance for 2013 planting decisions. Higher soybean-to-corn price ratios tend to indicate that soybeans are more profitable to plant than corn, and vice versa. Based on CME settlement prices during the first half of February, the soybean-to-corn price ratio is 2.27.

From a long-run historical perspective, the 2.27 is below average (see Figure 1). From 1975 through 2012, the average soybean-to-corn price ratio based on projected prices is 2.32. Hence, from a longer-run historical perspective, the soybean-to-corn price relationship favors corn production compared to soybean production.
fig1.jpg
However, the 2013 soybean-to-corn price ratio is near the 2007 through 2012 average. Since 2007, the soybean-to-corn price ratio has averaged 2.22. Hence, the 2.27 for 2013 is slightly above the 2.27 recent average, suggesting 2013 prices slightly favors soybean production.

The 2.27 soybean-to-corn price ratio also is not the lowest that have occurred (see Figure 1). There have been four years in which the price ratio is below 2. These occurred in 1976 (soybean-to-corn price ratio of 1.87), 2001 (1.90), 2002 (1.94), and 2007 (1.99).

Projected versus Harvest Soybean-to-Corn Price Ratios

A natural question is: Will a low soybean-to-corn price ratio based on the projected prices result in a low ratio in the fall and vice versa? If it does, there can be more confidence in making planting decisions on current price relationships. This question is examined by calculating the soybean-to-corn price ratios based on the harvest prices, and then comparing harvest price ratios to projected price ratios. Harvest prices are based on October settlement prices, thereby reflecting price relationships during the fall.

Figure 2 shows a scatter of yearly price ratios based on projected and harvest prices. In 2012, for example, the soybean-to-corn price ratio based on projected prices is 2.21 ($12.55 soybean projected price / $5.68 corn project price). Harvest prices result in a 2.05 ratio ($15.39 soybean harvest price / $7.50 corn harvest price). In Figure 2, the 2012 ratio is denoted by a red dot.
fig2.jpg
There is a positive correlation between projected and harvest price ratios of .30. Lower projected soybean-to-corn ratios tend to be associated with lower harvest price ratios. 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 is very low. However the 2007 harvest price ratio of 2.72 is above average. For the four years with price ratios below 2.0 (1976, 2001, 2002, 2007), the harvest price ratio averaged 2.35, above the 2.32 average of projected ratios from 1975 through 2012.

The low correlation calls into question basing planting too much of current price relationships. Often, price relationships change between spring and fall, altering final income from crops. Longer run rotational considerations likely should play a large role in planting decisions.

Summary

Settlement prices during the first half of February suggest that the 2013 projected price for corn will be near 2012 levels and the projected price for soybeans will be above 2012 levels. Crop insurance products will provide roughly the same risk protection in 2013 as they did in 2012.

Compared to 2012 prices, 2013 prices are slightly more favorable to soybean production. The soybean-to-corn price ratio in 2013 is projected to be higher than in 2012. Large corn plantings are projected. It will remain to be seen if farmers react by planting as much corn as is projected.

To see the original article, click here.

Gary Schnitkey


Tags: , , , , ,


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    AFB Grain-Soybean Close: Markets All Move Lower9-18

    AFB Cotton Close: Dec. Posts Losses but Maintains Support9-18

    AFB Rice Close: Higher Within Yesterday’s Range9-18

    DTN Cotton Close: Slips to 8 Session Low9-18

    Most Farmers Willing to Take More Steps to Improve Water Quality, Says Study9-18

    Corn: Nutrient Balance More Important Than Increasing Nitrogen9-18

    Arkansas Woman Joins Husband with 2nd Consecutive 100 BPA Soybeans9-18

    DTN Grain Close: New Lows for Soybeans, Wheat9-18

    Chumrau on Wheat: Huge Corn, Soy Harvests Will Test Grain Supply Chain9-18

    DTN Livestock Midday: Hog Futures Continue to Weaken9-18

    Keeping Your Cover Crops Legal — DTN9-18

    U.S. Grain Transportation: Miss. River at St. Louis Unusually High9-18

    Corn: Be Wary of Potential Storage Issues — DTN9-18

    DTN Grain Midday: Trading Lower Across Board9-18

    Wheat: Producers Urged to Keep Eye on Black Sea Countries’ Markets9-18

    Updating ARC-CO and PLC Payment Indicator for 2014 Crop Year9-18

    U.S. Drought Outlook: Improvements in Texas, Southwest9-18

    DTN Cotton Open: Remains in Red after Sales Data9-18

    Harvest Approaches in Iowa; Time for More Planting in Florida — DTN9-18

    U.S. Energy: Shale-Focused Companies’ Financial Performance Improves9-18

    Gasoline Prices: Average Falls 5 Cents9-18

    Propane Stocks: Rise by 1.4M Barrels9-18

    Diesel Prices: Decrease by a Penny9-18

    DTN Livestock Open: Contracts Geared to Recoil9-18

    DTN Grain Open: Soybeans Start 1 Cent Higher9-18

    Keith Good: USDA Approves Use of Dow’s New GMO Corn, Soybeans9-18

    Soybeans, Corn in Midwest: Heavy Rain, Early Frost, Slow Going – AgFax9-17

    Farmers First Line of Defense in Keeping GMOs Out of Export Shipments – DTN9-17

    DTN Livestock Close: Cattle Bulls Stage Midweek Recovery9-17

    Ohio: 7 Counties Declared Natural Disaster Areas9-17

    AgFax Peanut Review: Record Yields Expected for Virginia; Peanut Butter Salmonella Case Nears Close9-17

    42 California Counties Designated Natural Disaster Areas9-17

    AgFax Grain Review: Agribusinesses Sue Syngenta; 3 SE Farmers Break Yield Barrier, Set 2 State Records9-17

    Hearing Reflects Highly Politicized Debate Over Biotech Crops — DTN9-17

    DTN Fertilizer Trends: Rabobank Forecasts Higher 3Q Retail Prices9-17

    Cotton in Southwest: Need More Heat; 4-Bale Dryland; Pigweed Plans – AgFax9-17

    China Agrees to Buy $2.3B Worth of U.S. Soybeans — DTN9-17

    Doane Cotton Close: Renewed Selling on Overhead Resistance9-16

    Missouri Farmer Uses Pig Manure for Natural Gas Production – DTN9-16

    Non-Land Production Costs Unlikely to See Much Decline in 20159-16

    USDA: Weekly National Peanut Prices9-16

    AgFax Cotton Review: Chinese Acreage Declines; Weather Damages Crops in India, Pakistan9-16

    Rice Outlook: U.S. Production Forecast Lowered to 218.3M Cwt9-16

    Georgia Soybeans: Grower Randy Dowdy Breaks The 100-Bushel Barrier9-16

    Insure Your Crop Revenue Guarantee — DTN9-16

    Feed Outlook: Record Corn Crop on Higher Yields9-15

    Corps of Engineers Vindicated in ’11 Missouri River Basin Flood — DTN9-15

    Cotton Outlook: U.S. Production Cut Nearly 1M Bales9-15

    Oil Crops Outlook: U.S. Soybean Yields To Raise Ending Stocks to 8-Year High9-15

    Wheat Outlook: Higher Imports, Decreased Exports9-15

    Good on Grain: Revisions to Corn, Soybean Acreage Estimates Possible9-15

    Choose Your Cover Crops Carefully — DTN9-15

    GMO Critics to Get Their Say at D.C. Hearings — DTN9-15

    Arkansas Forage and Grassland Council Conference Set Oct. 30 in Conway9-15

    Arkansas Winter Forages: What to Plant and How Much9-15

    Flint on Crops: Variety Trials are Worth Your Attention9-15

    Kansas Farmers Can Pursue Prizes for Soybean Yields, Values9-15

    Farmland Auction: Arkansas, Louisiana, Mississippi Cropland – October 229-14

    Rice Crop: Harvest Zooms Along in Texas, Louisiana, Starts to Pick Up in the Delta9-12

    Rice Market: USDA Chops 11.5M CWT from Total Supply9-12

    Rose on Cotton: USDA Released a Bearish S&D Report9-12

    Environmental Groups Sue EPA Over Delay in Chlorpyrifos Ban – DTN9-12

    Cleveland on Cotton: Growers, Do Not Price Your Crop Right Now.9-12

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney