Market Signals Hint At 2019 Cropping Decisions

September 10, 2018 01:21 PM
 
The bean-to-corn price ratio has been as low as 2.25:1 this year.

Combines are rolling across corn and soybean fields, and we’ll soon know whether the 2018 crops are as big as USDA-NASS predicted earlier this summer. The agency estimates total U.S. corn production will be 14.6 billion bushels, with soybeans coming in at a total of 4.6 billion bushels.

If those big crops are realized they, along with current demand, give us a pretty good indication of what will happen production-wise in 2019, says Chip Flory, Farm Journal economist and host of AgriTalk and AgriTalk After the Bell (you can join the conversations for both at agweb.com/agritalk/).

“The bean-to-corn price ratio has been as low as 2.25:1 this year. That’s the market’s attempt to encourage more corn acres for next year,” Flory says. “And with the globe consuming more corn on an annual basis than we’ve produced in back-to-back years, there is a need for more corn.”

But instead of corn needing to bid for soybean acres, the bean market is currently willing to give up acres for 2019 due to the tariff with China and market uncertainty. “If those were eliminated, the bean market would certainly get a lift, and corn might be forced to actively bid for acres then, providing an additional lift in the price outlook,” Flory says.

If we are still dealing with tariffs next spring, expect soybean prices to languish and little improvement for corn prices. “That would equal very little lift for the corn market, more acres and more production than consumption in the 2019-20 marketing year on a global basis,” Flory says. “Corn has a good fundamental story to tell right now--an extension on the tariffs on beans would threaten that story.”

Given that outlook, some economists predict that more wheat will be in vogue for next year. Flory offers a mixed forecast. “There may be a few more winter wheat acres planted, with the expectations of double-cropping beans to build revenue. But the swing-acres, spring wheat acres in North Dakota, will be the decision to watch. With more incentive to plant corn, we could lose some spring wheat acres in 2019.”

While it’s still early in the decision-making process, nutrient decisions for 2019 are underway with farmers locking in some corn acres. Of course, rotational needs and issues will divvy up the bulk of the acres.  Flory adds that he anticipates growers will keep their options open on as many acres as possible for 2019, as we all wait and hope for a successful conclusion to the trade situation with China.

 

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