Fundamentally Speaking

As we end the year, we are seeing divergent price action in corn and beans. Corn is nearing levels seen last June and, except for a recent bounce, soybeans had been close to 4 1/2-year lows.

One reason is a far more bullish outlook for corn than soybeans, explaining a large fund long in corn and a sizable managed money short posture in soybeans.

This chart shows the U.S. corn and soybean stocks-to-use ratios from USDA's December WASDE report on the left-hand axis. On the right-hand axis is the new-crop November soybean/December corn price ratio as of Dec. 27 -- or right after Christmas.

Earlier this month, USDA pegged the 2024-25 soybean stocks-to-use ratio at 10.8%, which is the largest since the 2019-20 season. On the other hand, the December 2024 WASDE report saw a sizable drop in this year's ending stocks, paced by the largest ever November to December increase in exports of 150 million bushels (mb), resulting in a stocks-to-use ratio of 11.4% versus 12.9% the prior month. Other than the 2021-23 period, this is the lowest December corn stocks-to-use ratio since the 2012-13 marketing year.

This is just a 0.6% differential between the corn and bean stocks-to-use ratios, the fourth smallest in the past 25 years, showing how corn stocks are relatively tighter than those for beans. This feeds into ideas that corn will gain back some acres that were seeded to soybeans last year with early talk of a 2-million to 3-million acre switch between the two for the upcoming 2025 season.

Perhaps reflecting this is the current SX2025/CZ2025 ratio at $2.27 -- the lowest for around Dec. 27 since the 2012-13 season. Time will tell where this ratio is, come spring; but right now, likelihood of a monster South American soybean crop seems assured and the outlook for corn is far less certain with at least 75% of the Brazilian crop left to be planted.

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