Pro Farmer Extra
- From the Editors of Pro Farmer newsletter
At Risk: Chinese Bean Market
July 26, 2012
The new-crop bean:corn price ratio is about 2:1. I've had many producers tell me they aren't interest in increasing bean acres unless the price ratio is closer to 2.8:1 or even 3:1! The reason the ratio is so low right now is because of expectations of a big South American crop. But a big South American crop won't fix an exceptionally tight stocks situation here. And that's where the risk is for U.S. soybeans going forward.
We've never given South American producers as much incentive to increase acres as we are right now -- and they will respond. That means Brazil and Argentina will be securing a bigger share of the Chinese marketing in the 2012-13 marketing year and South America stands a good chance of becoming the "reliable supplier" of soybeans (which means the "supplier of choice") for China. If it happens, it'll take years to rebuild the U.S. soybean export market.
That's why the "acreage battle" for 2013 acres in the U.S. should get started very soon. November 2013 soybean futures have to start gaining on December corn futures (in a big way, and fast) as growers are making acreage decisions this fall. If not, we'll put down a pile of nitrogen that will lock in a huge amount of corn acres for 2013, potentially making beans an "after thought" in the U.S. crop mix.
Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory
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