Last week was a good one for corn futures prices, which rose 7.2 percent over the five sessions.
The increase was needed because the crop was falling behind soybeans in American farmers’ minds as seeding approaches.
The first trigger was a U.S. Department of Agriculture report that predicted the year-end supply of corn and soybeans would be smaller than thought. It expects that surprisingly strong ethanol demand will more than offset weak export demand.
The ball kept rolling when agricultural consultancy Informa Economics forecast a surprisingly small U.S. corn spring acreage number.
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Informa put corn area at 81.419 million acres, down 5.3 percent from last year, while soybean plantings would increase 7.6 percent to a record 81.502 million acres.
Corn also benefited from the generally upbeat mood that characterized all markets last week.
Corn’s momentum continued March 16 after finance ministers from the Group of 20 on the weekend agreed to co-ordinate their efforts to fight the recession and stabilize banks, leading to hopes that the world economy would revive.
With last week’s rally, the new crop soybean-to-corn ratio was in corn’s favour. Normally a ratio of 2.2-to-1 is the balance point. That means when the soybean price is 2.2 times the corn price, neither crop has the edge over the other.
So far this year, the ratio peaked at 2.36-to-1 in mid-January when worries about Argentina’s drought pushed soybean prices higher, giving it a strong edge over corn and encouraging farmers to seed the oilseed.
But after the corn price rally last week, the ratio had dropped to 1.97-to-1, encouraging farmers to seed corn.
So far this year, the weak economy has worked against the type of acreage battle that ignited markets in the late winter and spring of 2007 and 2008.
However, the market on March 16 generated a little spark as traders moved to close the gap that had developed between soybeans and corn, driving November soybeans up 27.75 cents US per bushel and pushing the ratio back to 2.02-to-1. However, that still indicates that corn would be more profitable than soybeans to seed.
Western Canadian farmers should keep an eye on this struggle for U.S. acres. A big increase in soybeans would weigh on oilseed prices, including canola. If there were a big drop in corn acreage, it would support feed grain prices, including barley.
Also, a big drop in corn acres would lower demand for nitrogen fertilizer, lessening the potential for shortages this spring.
The USDA report was negative for wheat, increasing the world carryout estimate. However, wheat futures shrugged off the negativity on March 16 on worries about the dryness in much of the U.S. winter wheat area. The crop is coming out of dormancy and will need rain soon, but there was none in the week’s forecast.
And speaking of wheat, there was good news that Canada is capturing a share of the Saudi Arabian market.
The oil giant announced last year it would stop subsidizing irrigation for wheat production and would instead import wheat. It said March 16 that it has bought 385,000 tonnes of wheat so far in 2009, all of it from Canada and all of it 14 percent protein. It gave no pricing details.
