The dynamics of crop consumption and the forthcoming acreage battle both favour corn prices over soybean values, a leading academic has said, forecasting an "extended bull market" in the grain.
Soybean buyers are already feeling the pinch from higher prices, Darrel Good, University of Illinois agricultural economist, said, highlighting industry data showing an 11.5% tumble in US processing of the grain last month.
"Soybean consumption has slowed much more than the approximately 4% needed" to ensure US inventories end the 2010-11 crop year at the 140m bushels that officials predict.
"It appears that soybean prices have increased enough to ration current supplies," Mr Good said.
And as for increasing US soybean production in 2011, this could be achieved by so-called double cropping, in which farmers follow up winter wheat harvests, which are undertaken relatively early, with a back-to-back soybean crop reaped in the autumn.
"Doubled-cropped acreage of soybeans could increase by 2m acres, following a similar decline last year."
Demand too strong
However, demand for corn had still not fallen enough to put the US on course to end 2010-11 with stocks of 745m bushels, Mr Good said, noting a15% rise, year on year, in the recent pace of exports since the start of December, and 12% growth in consumption by ethanol plants.
The 6.5% growth in consumption witnessed so far in 2010-11 needed to slow to 1.2% to get supplies back on track, meaning that corn prices still had more work to do to deter buyers.
Furthermore, to rebuild stocks, corn needed to lay claim to just about all the 6m US acres apparently going free for spring sowings. This acreage estimate was based on a return to 2008 planting levels, with an extra 3.7m acres counted in, having been released from conservative projects.
"Most of that 6m acres should be planted to corn" if US inventories were to recover even to about 1.3bn bushels next season - a figure still below average levels.
'Remain high'
"Based on the need to reduce the pace of consumption and to aggressively expand acreage, corn prices likely need to remain high in absolute terms and relative to other crop prices for an extended period," Mr Good added.
However, the conclusion contrasts with that of some other analysts, who believe that, with corn already the most profitable crop, it is soybeans which require a stronger sowing signal through higher prices.
Darren Dohme at Illinois-based Powerline Group said that soybean futures "will have to continue to trade to substantially higher levels to convince a farmer to switch from already very profitable corn projections for this coming spring.
"Why should I switch to soybeans when my corn profitability projects the highest its ever been at pre-plant time?
"The soybean market is going to have to out pace the corn and wheat rally by a 3:1 rally every day to finally convince me and any other corn farmer to go ahead and make the switch back to soybeans."
