Corn-Soybean Ratio Retraces
Jun 17, 2013
Corn closed the day session strong after opening rather weak on the overnight session. Old crop corn led the way higher while soybeans and wheat were mixed to lower. July corn closed 13 ½ cents higher at $6.68 ½ while December corn was 5 ½ cents higher at $5.38 ½. July soybeans were down 4 cents while November was down 12 ¾. July wheat closed ¼ of a cent lower at $6.80 ½.
On Sunday night the market was touting the favorable two week weather outlook as a bearish factor for new crop corn and soybeans but the strong day session appears to have reversed this trend in corn. Corn export inspections were almost double what they had been expecting which may have kick-started this strength. Soybeans and wheat fell just short of expectations.
NOPA crush was higher than expected at 122.63 million bushels in May compared to 118.1 as the average market guess. The USDA has already accounted for a higher crush estimate on the June report but crush may need to slow down a little more to meet their estimate. Domestic basis levels have remained strong especially for soybeans which could continue to support the bull-spreads while the new crop contracts remain a little overdone to the upside in our opinion.
The corn-soybean ratio retraced some of its recent strength today and we believe it has more room to drop. I have included a chart of this spread below. On a late planting year like this we would expect corn to hold better support compared to soybeans given the acreage swap. This may represent a more significant turn in this spread but a lot will depend on the results of the June 28th report.
November Soybeans/December Corn
Today’s crop progress report showed soybeans at 85% planted which is at the low end of the guesses. This may be slightly favorable for an initial price reaction on the 7pm reopen tonight. Corn is at 92% emerged and a good-excellent rating of 64%. This was around what the market was guessing for conditions but it is still early in the year for this to make a significant day-day impact on price. Soybeans were at 64% good-excellent as well. Spring wheat conditions jumped from 62% last week to 68% this week.
We are staying hedged using a combination of cash sales, futures, and put spreads. As a reminder the July CBOT options go off the board on Friday, June 21st. Please contact us if you would like a second opinion of your hedge protection. Have a great week!
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