The bumper U.S. corn harvest is pushing the price of the crop below $4.40 per bushel, a level not seen since 2010.
However, oilseed prices are doing better because of a tighter global supply, expectations that the U.S. Department of Agriculture will trim its U.S. soybean seeded area estimate in the next report and the hot, dry weather in the Midwest in late summer that limited yields.
Analysts expect stronger oilseed prices to increase soybean acres and reduce corn acres in South America, where seeding is in progress now.
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Early predictions are that American farmers will also favour soybeans next year, seeding a record large crop.
If the expectations hold true, it would keep downward pressure on the price of canola and other oilseeds next year.
Influential private analyst Informa last week forecast that American farmers would seed 83.9 million acres to soybeans next year, an increase of nine percent over this year.
Corn area would slide six percent to 91.7 million acres and wheat rise two percent to 57.7 million acres.
If realized, the soybean figure would be a record large area, ahead of the 78.1 million acres seeded in 2010.
The market is signalling against corn acres.
The November 2014 soybean futures contract was $11.71 per bushel Oct. 21, 2.42 times the value of the December 2014 corn contract, or a ratio of 2.42:1.
Some analysts say soybeans are more profitable to seed than corn when the ratio tops 2.2:1. Others put the ratio a little higher, but 2.42 is a fairly strong signal.
Another signal is that the Iowa State University extension division estimates that the break-even selling price for corn in Iowa is $4.18 per bu. However, the cost of production is $4.87 if costs such as depreciation on machinery and buildings, the value of unpaid labour and interest costs on term debt are included. That means today’s corn price falls short of covering all costs.
South America looks set to produce a record soybean crop.
Oilseed analyst Oil World forecasts that the five top soybean producers in South America will increase seeded area by close to four percent to 134 million acres.
There is a strong possibility that the United States will for the first time lose its crown as the world’s largest soybean producer to Brazil. Brazil has already been the top exporter for several years.
For the Brazilian soybean crop, which is considered the 2013-14 crop, analysts have a range of estimates from as low as 85 million to as high at 89.5 million tonnes.
That would be up from 82 million tonnes last year.
The USDA and several private forecasters are all at 88 million tonnes or more.
The current U.S. soybean production estimate is 85.7 million tonnes.
The forecasts for Brazil’s corn crop range from 71.4 million to 83.6 million tonnes, compared to 81 million last year.
Argentina’s government expects its farmers to seed 51 million acres of soybeans, up 1.6 million from last year.
It put the corn seeded area at 14.1 million acres.
Could all this mean that oilseeds will experience next year the same sort of price collapse that has plagued corn in recent months?
It’s too early to say yet because weather is always a wild card, and we don’t know what demand will be.
However, it’s possible there might be no shining star market performer in the lineup of 2014 crop choices.
