Canada Markets

I would like to begin by encouraging our Canadian readers to invest the time into reading this and understanding the ratio and its implications. It's just as critical for setting the tone for oilseed versus grain market advantages in Canada as it is for soybean versus corn price potential in the U.S.

For those that are unfamiliar, commonly referred to as the corn-soybean ratio, but more accurately, it's the soybean-corn price ratio -- is simply the price of soybeans divided by the price of corn. It is designed to represent the profit potential advantage of one crop compared to the other, thereby impacting seeding decisions.

The benchmark used for decades as the tipping point is a ratio of 2.5 (see the blue line on the attached chart). For example, $10 November soybeans divided by $4 December corn equals 2.5 with no expected impact on acres based on profitability factors in such a case. A higher value suggests soybeans will be favored, while a value below 2.5 indicates corn acres should rise (at the expense of soybeans).

I do believe that is somewhat obsolete given the rising costs associated with growing corn over the past few years, especially fertilizer and the increased interest on that outlay. It may be petty, but I think a value closer to 2.3 is more likely the current tipping point (see the red line on the attached chart).

Before moving on, I would like to draw your attention to 2022 as a key example. As you can see, the ratio spent all the time between March 2021 and June 2023 below 2.5. By the classical benchmark, that would have suggested high corn acres for 2022 and 2023. Instead, 2022 corn acres fell by 4.7 million from 2021. In my opinion, the ratio spending much of 2021 and the first two months of 2022 above 2.3 was enough to promote soybean seeding, considering the sticker shock from skyrocketing fertilizer prices from September 2021 through 2022.

It is much easier to look like you know what you're talking about when it is clearly above 2.5 (e.g., 2023-24, which led to large soybean acres in 2024) or clearly below 2.3 (e.g., 2022-23, which led to large corn acres in 2023).

As you can see, 2025 looks like a slam dunk for a large shift in those flex acres back to corn. Despite what some recent articles are suggesting otherwise. Note the insignificant bounce in the ratio that occurred when President Trump signaled tariffs would be placed on America's largest corn customer (Mexico), suggesting little to no impact.

Obviously, the ratio prepares everyone for an expected outcome on March 31 when USDA issues its Prospective Plantings report, but what about after? Given the final seeded area estimates in June often differ from planting intention projections to be released Monday, the ratio's reaction to the report will likely provide clues to the changes that may lie ahead. Should a surprise be in store that results in a material change to the ratio, it should predict altered flex acre plans accordingly.

And just to be clear, when I am referring to flex acres, they are merely those fields that are not pre-determined based on non-economic factors such as crop rotations, soil conditions, disease or insect limitations, and that sort of thing. It is not a program phrase (clarifying mostly for our Canadian friend's sake).

One final thought ahead of Monday's Prospective Plantings report. There can still be a bullish surprise in store for the corn market while adhering to the ratio signals. The total seeded area devoted to the top three crops (corn, soybeans and wheat) could come in below expectations.

USDA's Ag Outlook Forum predicted those three crops would cover 225 million acres, up from 223.7 million acres last year (pre-report estimates are looking for a total of 224.3 million acres). But why? With much lower expected profitability, much greater market risks with all the trade tensions, tariff wars and a drought trying to push up from the Southwestern U.S. into the Midwest corn and bean belt, why? It is worth noting that the last time profitability was this much of a challenge, the three crops were seeded on a total of 211 million acres in (a very wet) 2019 and 218.2 million acres in 2020.

So relatively speaking, corn acres may gain on soybeans, proving the ratio's predictive power accurate, but all three may surprise to the downside. And if not on Monday, keep that in mind for the final seeded area out in June.

In the meantime, Monday should let us know if the ratio is correct and new crop corn (cereal grains in Canada) faces an uphill battle pricewise, while oilseeds enjoy the greatest new-crop price potential, or not.

For more on the topic, see Joel Karlin's Fundamentally Speaking blogs at https://www.dtnpf.com/… and https://www.dtnpf.com/….

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I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

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