Chicago soybeans at historical highs versus corn ahead of 2024 season

That price difference in 2016 arguably led to the overproduction of U.S. soybeans in the following two years, moderating soybean futures. Next year’s prices show soybeans topping corn to a slightly larger degree than in 2016, possibly laying some bearish groundwork for 2024.

CBOT soybeans’ price-supportive 2023 story started with significantly lighter-than-expected U.S. soybean plantings, continuing with the exceptionally dry June weather. Beans again found strength this month with a yield-limiting dry stretch late in the growing season.

In the last three weeks, CBOT November soybeans have risen 6.6%, though December corn has lost 2.4%. That pushed the soybean-corn ratio to a seven-year high of 2.86 on Tuesday.

The CBOT bean-corn ratio, often used to indicate the crops’ relative profitability for U.S. farmers prior to the growing season, typically averages 2.47 during August. By contrast, the year-ago ratio was a highly corn-favoring 2.1, the date’s lowest since 2011.

2016 sets the recent historical limit for late August at around 3.0, and 2009 was the only higher year, staying just below 3.1. The U.S. corn and soybean crops were huge in both years, but soybean demand was booming, especially from China in 2016.

The bean-corn ratio was also elevated in late 2013, a year which has been frequently compared with 2023, particularly for corn futures. The ratio is currently moving at a very similar clip to 2013, and values have been almost lockstep throughout August.

The 2013 ratio topped at 3.0 in mid-September and never lost much strength afterward. Corn futures were declining at a faster rate than soybeans as U.S. corn supplies recovered significantly from the 2012 drought. Soybean supplies were shrinking, however, despite a near-record crop.

China markedly stepped up its soy imports in the 2013-14 marketing year, trimming U.S. bean supplies to multidecade lows. U.S. farmers responded in 2014 by planting nearly 6 million more soybean acres than the prior record, and favorable weather contributed to the collapse of soybean prices in mid-2014.

Chinese soy imports are expected to ease slightly in 2023-24, whereas a sizable jump for 2013-14 was already predicted as of August 2013. U.S. soy exports also contend with Brazil to a greater extent now than a decade ago.

2024 ON HORIZON

Next year’s December corn and November soybean futures already indicate heavier U.S. soybean acres for 2024 after declining 4.5% in 2023, hitting a three-year low.

The bean-corn ratio for the 2024 contracts reached 2.59 on Tuesday, the highest late-August levels since at least the mid-1990s. The only years since then with similarly strong values at this point were 2014 and 2016, corresponding to the 2015 and 2017 crop years.

The 2016 strength is notable because U.S. farmers in 2017 increased soybean plantings by 8% on the year, topping 90 million acres for the first and only time. Another strong ratio in late 2017 pushed 2018 soy acres over 89 million.

That acreage boost was logical on paper, but China’s soybean import expansion rate began to slow in 2017, and the market did not immediately realize it. By 2018, the U.S.-China trade war and deadly disease in China’s hog herd all but sealed the oversupply of soybeans in the United States.

In late 2014, the bean-corn ratio for 2015 eased. Prices were low by early 2015, causing both U.S. corn and soybean acres to contract that year. However, the strength of the 2014 ratio in late 2013 motivated farmers to expand soy acres in 2014 at the expense of corn.

A 2014- or 2016-style expansion of U.S. soybean acres may not be in the cards for 2024 given the limited pool of total acres and the market forces currently at play, especially on the demand front.

Since 2018, the highest U.S. soy area was in 2022 at 87.5 million acres, though it would take fewer than that to push domestic bean inventory to comfortable levels.