Fundamentally Speaking

The average settlement for Chicago Board of Trade December corn and November soybean futures during the month of February, which are used by the USDA to set their crop insurance policy guaranteed prices for the 2024 growing season, are set at $4.66 per bushel for corn and $11.55 for soybeans.

The base price for corn is down from $5.91 in 2023 and the lowest since the 2021 price projection of $4.58.

The soybean price is down from $13.76 in 2023, the second highest on record after the peak insurance projection of $14.33 in 2022.

This news comes after the initial planting projections were released by the USDA at their annual Ag Outlook Forum last month of 91 million acres for corn in 2023, down from 94.6 million acres the previous year and 87.5 million acres of soybeans, up a sharp 3.9 million from the 83.6 million acres seeded in 2023.

Studies suggest that given these guaranteed prices, plantings of both corn and soybeans will be unprofitable this year though right now producers will lose less money per acre planting soybeans as opposed to corn.

Note that using the average guaranteed prices the November soybean/December corn ratio comes in at 2.48 which is above the average seen in recent years.

It is thought a ratio in excess of 2.33 would favor increased soybean seedings vis-à-vis corn and vice-versa, though this ratio can change over time and has.

Case in point, just two years ago the SX2022/CZ2022 ratio fell from 2.45 on February 17 to as low as 2.00 by May 11 as markets tried to entice farmers to stick with their intended corn seedings even as a wet spring delaying planting.

Still final 2022 corn planted area at 88.6 million acres were well below USDA Ag Outlook projection of 92.0 million acres while soybean acreage basically was unchanged from Feb Ag Outlook projection to final figure.

This chart shows the change in the November soybean/December corn ratio from Jan 1 to Feb 1, Feb 1 to Mar 1 and Mar 1 to Apr 1 on the left-hand axis vs the SX/CZ ratio as of Mar 1 on the right-hand axis.

Last year as opposed to 2022 there was not much change as SX2023/CZ 2023 ratio was 2.32 on January 1, 2.31 on March 1 and then did increase slightly to 2.36 before falling back to 2.33 by April 1.

Of more note last year were the acreage changes as from March intentions to June acreage report corn planted area increased by over 2 million acres while bean seeded area plunged by 4 million acres.

As we get closer to the start of the planting season, unusually warm weather in the Midwest suggests an early start to spring seedings which could result in a larger corn planted area than the 91 million acres projected by the USDA while a very dour demand outlook for beans casts doubt on whether soybean plantings will in fact increase close to the 4.0 million acres the USDA is estimating despite the current 2.48 SX2024/CZ2024 ratio.

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