Projected prices and soybean-to-corn price ratios in 2013

Based on settlement prices during the first half of February, the projected price for corn will be $5.73 per bushel for corn and $13.01 for soybeans, giving a soybean-to-corn price ratio of 2.27 (2.27 = $13.01 / $5.73). The 2013 corn projected price will be near the 2012 projected price and the 2013 soybean projected price will be above the 2012 level. The 2.27 soybean-to-corn price ratio is slightly above the average of price ratios in recent years.

Projected Prices in 2013

Projected prices are used to set crop insurance guarantees. These prices are based on settlement prices of Chicago Mercantile Exchange (CME) contracts during the month of February. The December contract is used for corn and the November contract is used for soybeans. These projected prices will have large impacts on risks farmers face during 2013. Higher projected prices will cause crop insurance products to offer more downside risk protection.

During the first half of February, settlement prices would result in a $5.73 projected price for corn. This $5.73 price is near the $5.68 price level for 2012; hence, the 2013 projected price likely will provide similar protection to that offered in 2012.

During the first half of February, settlement prices would result in a $13.01 projected price for soybeans. This $13.01 projected price is $.46 higher than the 2012 projected price of $12.55. Hence, the 2013 price likely will provide more risk protection for soybeans than the 2012 projected price.

Price Ratios

Market prices provide some guidance for 2013 planting decisions. Higher soybean-to-corn price ratios tend to indicate that soybeans are more profitable to plant than corn, and vice versa. Based on CME settlement prices during the first half of February, the soybean-to-corn price ratio is 2.27.

From a long-run historical perspective, the 2.27 is below average (see Figure 1). From 1975 through 2012, the average soybean-to-corn price ratio based on projected prices is 2.32. Hence, from a longer-run historical perspective, the soybean-to-corn price relationship favors corn production compared to soybean production.

However, the 2013 soybean-to-corn price ratio is near the 2007 through 2012 average. Since 2007, the soybean-to-corn price ratio has averaged 2.22. Hence, the 2.27 for 2013 is slightly above the 2.27 recent average, suggesting 2013 prices slightly favors soybean production.

The 2.27 soybean-to-corn price ratio also is not the lowest that have occurred (see Figure 1). There have been four years in which the price ratio is below 2. These occurred in 1976 (soybean-to-corn price ratio of 1.87), 2001 (1.90), 2002 (1.94), and 2007 (1.99).