by Agrimoney.com
Has the march of corn prices, compared with soybeans, reached its end?
The grain's rally - fuelled by a poor US spring sowing season at a time when stocks of the grain are already near historic lows - has already seen it notch up a landmark against wheat, only sharply to surrender it.
Chicago corn last month gained premium to wheat for the first time since 1996 - temporarily. On Wednesday, Chicago wheat had a $0.45-a-bushel advantage.
Societe General believes corn might be on for a reversal in its relationship to soybeans too.
The French bank named a "long soybeans, short corn" trade, on new crop contracts, as one of its top investment bets, among a list of recommendations ranging from selling protection on China Development Bank to a trade of buying the pound and selling the yen.
Key ratio
The idea is based on the idea that corn prices rarely move near half those of corn for too long.
Indeed, as a rule of thumb, a drop in the price of soybeans below 2.0 times that of that grain is viewed as the trigger for farmers to switch sowing area from the oilseed to the grain. (The dynamic is seen working the opposite way at a ratio of about 2.5.)
Yet that is pretty much where futures prices are lodged now, on prices for the forthcoming harvest.
With November soybeans at $13.24 a bushel on Wednesday, and December corn at $6.54 a bushel, the ratio was 2.02.
Surplus vs deficit
"The end-2011 soybean-to-corn price ratio currently stands at a historically very low level which makes it much more profitable for US farmers to plant corn instead of soybeans," SocGen commodity strategist Jesper Dannesboe said.
"This means that new season US corn production is likely to increase by 3-4%, resulting in a global corn surplus while we expect a global deficit for soybean."
"Based on this, we expect the November 2011 soybean over December 2011 corn ratio to increase substantially over coming months."
The ratio should return to 2.3, near where it stood at the start of the year, Mr Dannesboe said.
'Too soon'
If that sounds appealing, remember the one sticking point is whether US farmers, many of which have been dogged by an unusually wet spring, can even get their existing corn planting plans completed, let alone any extra area that the ratio with soybean prices might dictate.
Indeed, talk has been of the loss of at least 1m acres of corn area and potentially a rise in plantings of soybeans, which can be later sown.
Still, "it is too soon to determine what kind of acreage shifts there may be way from corn to soybeans as economic factors and fall fertilizer applications, along with the calendar, will still play a vital role in any acreage shifts," Kim Rugel at Benson Quinn Commodities said.
Farmers who pumped extra fertilizer into soils in the autumn may be reluctant to switch to soybeans, which are less nutrient intensive.
Furthermore, technically, it is unclear whether the market has much appetite for weakening, relative to corn.
Rugel noted that in the last session, soybeans had fallen into negative territory, only to recover after the visit "did not uncover sell stops", automatic sell orders, which would have driven the oilseed lower still.
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