Canada Markets

The New-Crop Soybean/Corn Ratio: Implications for Canadian Acres

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The grey bars represent the November soybean/December corn ratio as determined in late March, measured against the primary vertical axis. The brown line represents the year-over-year percent change in corn acres planted in Canada, while the black line represents the percent change in soybean acres, both measured against the secondary vertical axis. The last bar represents the new-crop soybean/corn spread as determined on March 27. (DTN graphic by Cliff Jamieson)

This week, DTN Contributing Analyst Joel Karlin posted a Fundamentally Speaking piece titled End of March New-Crop Soybean/Corn Ratio. In his work, Karlin looks at the new-crop November soybean/December corn ratio calculated on the day prior to the USDA's Prospective Planting report each year, while determining how this data affects the corresponding planted acres for both soybeans and corn in the United States. This ratio is viewed as just one of the factors that can influence this planting decision.

The long-term rule of thumb states that when the new-crop soybean/corn ratio exceeds a ratio of 2.4, soybean acres will increase relative to corn acres on a percentage basis. Given the years considered on the attached chart, this relationship in Canadian acres held true in five of seven years where the late March soybean/corn ratio exceeded 2.4. In one of the seven years, corn acres increased relative to soybeans acres, while in one of the years, acres for both fell year-over-year, with corn acres falling more than soybeans.

In the four years on the chart showing the lowest ratio, which should favor a switch to corn acres -- 2001, 2007, 2008 and 2009 -- this relationship only held true in two of the four years.

The divergence seen in 2017 could be an extreme response to a high new-crop soybean/corn ratio of 2.53 in late March, as soybean acres expand rapidly in Western Canada. This resulted in a year-over-year percent change in soybean acres of 29.9% while corn acres contracted .4% overall.

The last grey bar on the chart represents the March 27 new-crop soybean/corn ratio of 2.57, which is the highest seen since 2005. Current AAFC estimates suggest that Canadian corn acres will increase by 1.9% while soybean acres will increase by 1.8%; this analysis suggests that a further swing into soybeans may be seen.

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Cliff Jamieson can be reached at cliff.jamieson@dtn.com

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