What is in this article?:
- Recent Price Changes Increase Soybean Returns Over Corn
- Change in Expected Corn and Soybean Returns
Price changes during the first quarter of 2013 have resulted in lower expected returns for both corn and soybeans, but expected corn returns decreased more than soybean returns. On lower-productivity farmland, where corn-to-soybean yield ratios are more favorable than on higher-productivity farmland, soybeans after corn now is projected more profitable than corn after corn. For both high- and low-productivity farmland, continuous corn rotations are less profitable than corn-soybean rotations. Whether these expected return changes will impact plantings remains to be seen.
USDA's March 2013 estimates of corn stocks were substantially higher than trade estimates (see here), initiating a substantial decline in both corn and soybean prices during the past week. In this article, the relative profit impacts for 2013 crops of these price changes are examined. During the first quarter of 2013, price changes have increased expected soybean returns relative to expected corn returns.
Corn and Soybean Price Changes
Central Illinois forward cash bids for 2013 harvest time were collected on Jan. 14, Feb. 28 and April 2 (see Table 1). Note that these are forward cash bids. Since the release of USDA reports on March 28, cash bids have declined more than harvest-time bids. For corn, cash prices fell roughly 90¢/bu. compared to roughly 40¢/bu. for harvest-time forward bids.
On Jan. 15, corn harvest-time bid was $5.60/bu. and soybeans were $12.50/bu., giving a soybean-to-corn price ratio of 2.23. On Feb. 28, corn forward bid was $5.30 and soybeans were $12.25, giving a soybean-to-corn price ratio of 2.31. Between Jan. 15 and Feb. 28, the soybean-to-corn price ratio increased from 2.23 to 2.31, indicating the price changes increased expected soybeans returns relative to expected corn returns.
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On April 2, corn forward bid was $5.10/bu. and soybeans bid was $12.20/bu., resulting in a soybean-to-corn price ratio of 2.39. The soybean-to-corn price ratio increased from 2.31 on Feb. 28 to 2.39 on April 2, again indicating that price changes increased relative expected soybean returns.