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

    Midwest Corn And Soybean Yields – Our Readers’ Reports – AgFax11-22

    Rice Comment: The Case for Neonicotinoid Seed Treatment11-22

    U.S. Rice: Rain Stalls Texas 2nd Crop Harvest; Crop Sales Continue11-22

    Rice Market: Sale to Iraq Moves the Market11-22

    AgFax Grain Review: Syngenta Lawsuits Pile Up; GMO Seed Companies Sue Hawaii11-21

    Rose on Cotton: Looking for the Positives This Week11-21

    Grain Drying: What Happens After Sudden Temperature Drop?11-21

    Is Your Lifestyle Costing You the Farm?11-21

    Grain TV: Lower Barge Rates Boost Basis Levels11-21

    DTN Livestock Close: Cattle Futures Solidly Higher11-21

    Farmers Storing Grain Need to Weigh Risk Management Factors – DTN11-21

    Peanut Harvest Updates From Southeast, Delta And Southwest – AgFax11-21

    Cleveland on Cotton: 57 Cents – ‘The Bottom is In’11-21

    Ag Labor: Immigration Order Provides Little Long-Term Benefit – DTN11-21

    Doane Cotton Close: Decline in Chinese Production Offers Support11-21

    AFB Grain-Soybean Close: Strong Soybean Gains, Little Movement in Corn, Wheat11-21

    Southern Soybean, Corn Harvest Reports, Round One – AgFax11-21

    AFB Cotton Close: Futures Rebound11-21

    AFB Rice Close: Prices See More Slight Gains11-21

    DTN Cotton Close: Settles Higher on Light Volume11-21

    DTN Grain Close: Soybeans Boosted by Demand11-21

    USDA: Peanut Price Highlights11-21

    Oklahoma Pecans: Deliveries Remain Light11-21

    Georgia Pecans: Buying Interest Very Active11-21

    Ag Policy: Farm Bills Need Long-Term View11-21

    Cotton Market Weekly Review by Region11-21

    DTN Livestock Midday: Cattle Futures Surge Higher11-21

    A Closer Look at Impacts of Olympic Averaging of Prices and Yields11-21

    Arkansas Cattle: Ranchers Should be Alert to Acorn Poisoning11-21

    DTN Grain Midday: All 3 Commodities Go Higher11-21

    Economist: Livestock Industry Will Have Strong Rebound11-21

    DTN Dried Distillers Grain: Cheaper Feed Source for Beef Producers?11-21

    Mississippi Outdoors: Common Deer Parasites Do Not Affect Venison11-21

    DTN Cotton Open: Trades Higher after No Notices Issued11-21

    AgFax Wildlife Review: New E-Book Offers Tips for Gardening in South11-21

    DTN Livestock Open: Cattle Futures to Start Mixed11-21

    Weather Challenges Florida and Iowa Farms — DTN11-21

    Vilsack: Immigration Order Creates ‘Stability’ in Ag Work Force — DTN11-21

    DTN Grain Open: Lower Start Across Board11-21

    Keith Good: What’s Next for Meat Labeling?; Sugar Prices Take Tumble11-21

    Texas Cotton Harvest – Still Some To Go – AgFax11-20

    Mississippi: Water Conservation Summit, Stoneville, Dec. 1011-20

    Farm Internet Service Still Slow or Non-Existent, But Improving – DTN11-20

    Yield: Important Factor in Your Irrevocable Farm Program Choice11-20

    U.S. Grain Transportation: Weekly Inspections Reach Record11-20

    U.S. Drought Outlook: Improvements Expected for California, Southwest11-20

    U.S. Energy: Planned Refinery Maintenance Light in 201411-20

    Propane Stocks: Post Slight Increase11-20

    Gasoline Prices: Decrease by 5 Cents11-20

    Diesel Prices: Average Drops 2 Cents11-20

    Livestock: Arctic Chill Catches Markets Flatfooted – DTN11-19

    Farm Runoff Targeted for Regulation Following Algal Bloom Shutdown – DTN11-19

    Soybeans: China May Import More Non-GMO Beans – DTN11-19

    Mississippi Outdoors: Free Apps Can Aid Deer Hunters11-19

    Big River Rice And Grain Enhances, Expands Facilities In Arkansas, Louisiana11-19

    Farm Bill Commodity Program: Decisions and More Decisions11-18

    Young Farmers: USDA is the ‘Lender of 1st Opportunity’ – DTN11-18

    Tax Extenders: Farm Groups Push Congress to Renew Section 179 This Year – DTN11-18

    AgFax Rice Review: Iraq Passes on U.S. Rice; Australia, China Sign FTA11-18

    USDA: Weekly National Peanut Prices11-18

    DTN Fertilizer Trends: Prices Show Little Movement11-18

    North Carolina: Bt Resistant Armyworms Migrating North11-18

    Georgia Cotton Commission Meeting, Production Workshop, Tifton, Jan. 2811-18

    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