In late November, DTN Contributing Analyst Joe Karlin studied the new-crop soybean/corn ratio and its ability to signal changes in corn and soybean acres. This study has taken place using a ratio calculated on the day before the U.S. Thanksgiving in late November, so the attached chart uses this same date. Another difference in this analysis is that Joe Karlin calculates the difference between final acres in one year and March planting intentions the next, while this analysis looks at final seeded acre estimates from one year to the next.
Karlin's rule of thumb is that an average ratio of 2.35 is viewed as neutral, while a ratio above this level tends to favor soybeans over corn and ratios below this level tends to favor corn over soybeans. The attached graphic shows this ratio at its lowest in three years, as soybeans look less attractive relative to corn.
As seen on the attached chart, this relationship may have proved true in six of the past 10 years, where the ratio above 2.35 led to soybean acres increasing while corn acres declined, or soybean acres grew at a faster pace. These six years also included years where ratios below 2.35 tended to favor corn.
One year on the chart where this notion failed to materialize was in 2018, where a November ratio of 2.59 led to a year over year decline of 13.2% in Canadian soybean acres as compared to a 1.4% increase in corn acres planted.
The November 2018 ratio is calculated at a neutral 2.35, while is calculated steady at this level this week, which tends not to favor one crop over the other. Other factors that can come into play include low absolute prices that could lead to a reduction in acres dedicated to both crops. As well, the late harvest in Ontario that extended into December limited fall fertilizer applications, while high levels of fusarium in the 2018 crop in Ontario may force some to rethink rotations.
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Cliff Jamieson can be reached at email@example.com
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