Fundamentally Speaking
Joel Karlin DTN Contributing Analyst

Wednesday 07/16/14

Nov Bean/Dec Corn Price Ratio

As of July 15, 2014 the November 2014 soybean-December 2014 corn price ratio is 2.83.

That is much higher than the daily 1990-2014 average of 2.35 and is the highest SX/CZ price ratio as of July 15 since July 15, 1993.

This high soybean/corn ratio has persisted for a while and no doubt contributed to a 3.72 million acre decline in planted corn area this year and a whopping 8.31 million acre increase in planted soybean area.

The high soybean/corn ratio has also reflected a very comfortable corn stocks to use ratio while for most of the 2013/14 season the soybean stocks to use ratio has been the lowest of all-time.

Circumstances have changed however over the past few weeks as the all-time high soybean acreage combined with record yield projections implies a huge crop in the making that will bring ending supplies to almost burdensome levels even if demand is the highest ever this coming year.

The accompanying graphic shows the difference between the U.S. corn stocks to use ratio and the U.S. soybean stocks to use ratio as reflected in the July WASDE report.

We suspect that the larger the difference between the two ratios or the greater that the corn stocks to use ratio exceeds the soybean ratio the higher the soybean/corn ratio will be on July 15.

Note that since 1985, the average SX/CZ price ratio as of July 15 has been 2.46 and the July WASDE corn stock to use ratio has exceeded the soybean stock to use ratio by 6.4%.

Prior to this season, high November soybean-December corn price ratios as of July 15 were back in 2005 at 2.73 when the corn stock to use ratio exceeded that of soybeans by 13.9%, 2.91 ratio back in 1993 when corn stocks to use was 8.5% above soybeans and the period from 1986-1998 when the three year average of the July 15 SX/CZ ratio was 2.86 and the corn stock to use ratio exceeded that for soybeans by an average of 34.4%.

It then appears that this year's 2.83 SX/CZ price is very high given that the 2014/15 corn stocks to use ratio based on the July 2014 WASDE only exceeds the soybean stocks to use by a mere 1.8%.

If this is the case then the soybean stocks to use ratio is very high compared to corn as suggests that the current November soybean-December corn ratio should come down over the next few weeks especially if the difference between the two stock to use ratios gets smaller which is anticipated.

(KA)

Posted at 10:00AM CDT 07/16/14
Comments (2)
It has stayed stubbornly high for quite a long time now...as we move thru July, this corn crop will likely be "made" as July is the key month for corn pollination. If for some reason it would get dry in August, the key month for beans, the SX/CZ ration could actually move higher! But with all things being equal - assuming the weather continues - you would think the ratio would have to come down. Just haven't seen it yet, including this week, when it has moved higher yet again.
Posted by Peter Smith at 9:12AM CDT 07/17/14
An higher the ratio goes...almost daily. The corn crop is made, and the market has doubts about the 415 million bu carryover numbers for soybean stocks next year.
Posted by Peter Smith at 12:15PM CDT 07/24/14
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