Chicago's soybean market is currently witnessing a significant shift. After years where corn seemed to be the more favoured crop, soybeans are now taking the lead, showing their strongest performance compared to corn since 2016. This suggests that concerns over soybean supply are now surpassing those related to corn.
That price disparity back in 2016 may have inadvertently caused an overproduction of soybeans in the US for the subsequent two years, which in turn pressured soybean futures. Projections for the upcoming year indicate that soybeans might overshadow corn even more than they did in 2016, potentially setting a cautious tone for the long-term outlook.
The 2023 surge in CBOT soybean prices can be traced back to unexpected reductions in US soybean planting, further exacerbated by an unusually dry June. This trend continued with another dry spell later in the growing season, further bolstering soybean prices.
Recent data shows that in the past few weeks, CBOT November 2024 soybeans have seen a 60-cent increase, while December 2024 corn has gone sideways. This has elevated the soybean-corn ratio to a seven-year peak of 2.7. The ratio of the nearby futures contracts is more extreme, briefly hitting 3 last week.
This bean-corn ratio is a crucial metric, often used to gauge the potential profitability of these crops for US farmers before the planting season begins. If the current trend in favour of soybeans continues this winter, there is the potential for a much larger seeded acreage in the spring.
The US acreage war will continue to heat up into early 2024. For now, soybeans are clearly in the driver's seat.