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Corn vs Soybeans 2025 · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:23
  SPEAKER_00: Today is December 27th.
• 0:25
  SPEAKER_00: I've got Lucas Peters here today, and we have a fun topic.
• 0:28
  SPEAKER_01: Yeah, it's always a good time to talk corn versus soybeans, right, Mike?
• 0:32
  SPEAKER_00: Corn versus soybean, relationship, ratio, planning decisions, however you want to talk about it.
• 0:38
  SPEAKER_00: Following up, Christmas, I hope everyone had a fantastic holiday.
• 0:42
  SPEAKER_01: Yes, I do as well, Mike, and looking forward to having a discussion about the 2025 crop on this, the last Friday of 2024, heading into the new year uh next week, Wednesday.
• 0:56
  SPEAKER_00: It's been a fun year.
• 0:58
  SPEAKER_00: 20,000 listens now between the two podcasts in just 2024 alone.
• 1:03
  SPEAKER_01: Well, that's pretty good, Mike.
• 1:04
  SPEAKER_01: Way to go.
• 1:05
  SPEAKER_00: So it's been a fun, been a fun year.
• 1:07
  SPEAKER_00: Thanks for listening, everybody.
• 1:08
  SPEAKER_00: But let's talk about this corn for soybean relationship here, this ratio.
• 1:12
  SPEAKER_00: So uh the relationship is most of the time discussed as soybeans divided by corn.
• 1:18
  SPEAKER_00: So November 2025 soybeans divided by 2025 corn futures is floating around at 2.27 today.
• 1:27
  SPEAKER_00: Now, to put that into context or perspective, that's pretty much as tight as we've been for a new crop relationship since 2018, especially under 2.25 here, and we really haven't played much below that.
• 1:40
  SPEAKER_00: If you go all the way back like to 2011, 2012, those years we did have a relationship that was more favorable towards corn, closer to about a 1.9 to 2.0 type relationship.
• 1:55
  SPEAKER_00: So at to put this into perspective, 2.25 or 2.27 today, very, very tight.
• 2:02
  SPEAKER_00: Corn is very high relative to what soybeans is compared to normal historically.
• 2:08
  SPEAKER_01: Yeah, I guess that's where where my head went is like, okay, so if we're comparing the ratio, uh like one of these prices has to be different since this isn't a typically normal ratio.
• 2:19
  SPEAKER_01: And I would agree with you, like the soybean number or price is a lot lower uh than where corn is or what the way it feels in the marketplace right now.
• 2:28
  SPEAKER_00: Now let this sink in too.
• 2:30
  SPEAKER_00: The last time or in history that we've had, when I was going back, the times that we've had a like 2.0 relationship where corn is only 2.0 times less than soybeans, is typically when corn price is very high.
• 2:44
  SPEAKER_00: Correct.
• 2:45
  SPEAKER_00: Like back in 2012, corn price was seven dollars or six dollars, and soybeans were twelve or thirteen.
• 2:51
  SPEAKER_00: It was very, very high prices.
• 2:53
  SPEAKER_00: So it's very odd for us, you know, soybeans pretty much sub ten bucks here to have that going on.
• 2:59
  SPEAKER_00: I thought that was one observation right off the bat that was kind of interesting with the relationship and the ratio.
• 3:05
  SPEAKER_01: Yeah, so so let's look at that ratio and and just explore a little bit further.
• 3:09
  SPEAKER_01: Uh so as we sit today on the the 27th of December with 2.27, right?
• 3:15
  SPEAKER_01: Is what what we're at.
• 3:17
  SPEAKER_01: Um so what what's more likely to happen?
• 3:21
  SPEAKER_01: Like if we look forward a month or two or three months before we hit the field, obviously the ratio can change because corn price can move, soybean price can move, and of course uh or they can move together, of course, or opposite.
• 3:35
  SPEAKER_01: Um, and so like if you're playing the odds or or what you're thinking, uh are we more likely to see soybean price fall further or corn price fall in relation to improve the the ratio?
• 3:50
  SPEAKER_01: Um, you know, I I know we aren't uh predictors of the market, Mike.
• 3:54
  SPEAKER_01: This is just crystal ball looking uh as we look towards some things that might move the market.
• 4:00
  SPEAKER_01: Of course, we have an administration coming in uh that uh I mean the big talk in the egg world is tariffs.
• 4:08
  SPEAKER_01: So that's not probably going to help the soybean price go up, uh, if in my mind.
• 4:13
  SPEAKER_01: Uh and then the other thing we got is the January Wazdi report, which can be a market mover in the past, right?
• 4:18
  SPEAKER_01: That's always been kind of a fireworks show.
• 4:21
  SPEAKER_01: So what uh what's your feeling?
• 4:23
  SPEAKER_01: Is is there's something in the near term that where you could see moving one of these prices to to change the ratio, or are we kind of stuck here for a while?
• 4:33
  SPEAKER_00: So from a timeline, uh the next big date is January 10th, you've got the WASDA, then Trump's inauguration is right after that.
• 4:41
  SPEAKER_00: So that would be your next major timeline, probably February, let's just call it by the time he starts really uh making any market making moves.
• 4:49
  SPEAKER_00: Then after that, you've got the February Outlook Report, which t normally gives us somewhat of an outlook that probably shouldn't be traded, but I think probably does.
• 4:59
  SPEAKER_00: And then you got the um intended acreage report at the end of March, and then you've got the you know obvious planning progress, things like that through April and May.
• 5:10
  SPEAKER_00: And then after that, you know, a couple of WASD reports, but then the end of June, you've got the uh acreage report, the final acreage.
• 5:18
  SPEAKER_00: Yep.
• 5:18
  SPEAKER_00: Now that one, if we're looking back in history to see, you know, like how you just asked the question of you know, what should we expect going forward?
• 5:25
  SPEAKER_00: The most recent time that we had a tight stocks or uh tight soybean to corn relationship here ratio was back in 2023, and it really wasn't even this tight, but it was tighter relative to normal.
• 5:38
  SPEAKER_00: Now to put that into perspective, what had happened was corn was pretty high relative to soybean price right now, at this time of the year in 2023.
• 5:47
  SPEAKER_00: We planted, did everything.
• 5:49
  SPEAKER_00: June comes along with the final intended or final acreage report, and we found out that we planted a ton of corn acres.
• 5:57
  SPEAKER_00: So the farmer responded to, hey, we've got a better corn price, I'll plant more corn.
• 6:02
  SPEAKER_00: And they went and did that that year.
• 6:03
  SPEAKER_00: So that really from that point on, then that influenced the markets from a perspective of we planted 94 million acres of corn or something close to that that year, and then 83 million acres of soybeans was all so that obviously pushed the markets after that in favor of soybeans and probably hurt corn a little bit as well with that.
• 6:22
  SPEAKER_00: So looking back to know what's gonna happen, I guess, or to try to expect that would be the most recent example in history that we have.
• 6:29
  SPEAKER_01: Correct.
• 6:29
  SPEAKER_01: Well, and I like how you laid that out there on the on the important dates, right?
• 6:32
  SPEAKER_01: So if we're gonna get through a wazer report, we go through the the inauguration, February, uh, the outlook forum, but also you know, we're setting the crop insurance price then and then the intended acreage report here at the end of March.
• 6:46
  SPEAKER_01: By then, like the farmer's mind is pretty made up.
• 6:51
  SPEAKER_01: Like it's I know the final numbers don't come till June, but as a farmer, it's pretty rare you go into the first part of April still wondering, you know, maybe that one field I'm gonna plant corn, or maybe I'll plant some.
• 7:04
  SPEAKER_00: It's up to weather at that point.
• 7:05
  SPEAKER_01: Exactly.
• 7:06
  SPEAKER_01: And a lot of times weather is forcing your hand to do something you don't want, right?
• 7:11
  SPEAKER_01: So um, so I like how you laid that out.
• 7:13
  SPEAKER_01: Well, if I would say if everything kind of stays as is, you know, through January into mid-February, uh based on what we saw in 23, farmers will follow the ratio and plant more corn, and we'll start getting all sorts of estimates out of where that U.S.
• 7:31
  SPEAKER_01: corn acre number is going to be nationwide.
• 7:34
  SPEAKER_01: And I know there's some out already, uh approaching 94, 94.5, 95 million acres of corn, and we'll get more and more of those as they come uh until we hit that end of March intended acreage aboard.
• 7:45
  SPEAKER_00: So let's talk about it's easy to just say the ratios as plant corn plant soybeans.
• 7:50
  SPEAKER_00: Talk to me about the actual logistics of it agronomically.
• 7:54
  SPEAKER_00: Uh what do you see with both inputs and then yield patterns as well?
• 7:59
  SPEAKER_01: Yep.
• 7:59
  SPEAKER_01: So excellent question of you know that's one thing to look at a ratio and and to plant something or plant a crop based on that.
• 8:07
  SPEAKER_01: It's another thing to actually do it uh when you're the farmer and and looking at planting more corn acres.
• 8:13
  SPEAKER_01: And first off, I I think it's important when we talk about this, like uh for most operations, it's not like we're flipping our entire operation to all corn.
• 8:22
  SPEAKER_01: We're not planting soybeans, it might be a quarter or or a field or two, right?
• 8:26
  SPEAKER_01: That well, maybe we can go corn here or or soybeans, we have a little bit of flexibility.
• 8:33
  SPEAKER_01: Um, and there's lots of things that go into the decision, but kind of some generalities.
• 8:38
  SPEAKER_01: That first year of corn on corn, uh, you're gonna take a five to fifteen percent yield hit, uh right?
• 8:45
  SPEAKER_01: It a lot depends on the weather that year.
• 8:48
  SPEAKER_00: Yeah.
• 8:48
  SPEAKER_01: First being spring planting conditions, right?
• 8:51
  SPEAKER_01: If if you were this past fall were planning on following your normal rotation, maybe you didn't till those corn stocks very aggressively, uh, didn't bale them, didn't uh you're gonna no-till beans into them, rehit them with a disc uh, you know, just to chop up the stocks.
• 9:09
  SPEAKER_01: Well, now if I'm gonna plant corn there, more than likely you're gonna hit it with a more aggressive tillage pass, and that's gonna have to happen in early spring.
• 9:18
  SPEAKER_01: Uh so we have to have some weather cooperation there uh as well.
• 9:22
  SPEAKER_01: And so if it doesn't cooperate and it's wet and we don't do the normal tillage that we want or prep soil preparation that we want, now we're going to plant that corn in an unfavorable environment, which is gonna lead to a yield loss potentially, right?
• 9:37
  SPEAKER_01: So the first thing weather is that planting.
• 9:40
  SPEAKER_01: Secondly, the the weather, of course, during the growing season, because now uh I I have I don't have that rotation of um uh kind of the different root levels of corn versus soybeans, and so moisture becomes more critical.
• 9:57
  SPEAKER_01: Like we we have to have timely moisture through the growing season, kind of throughout the growing season to get us to avoid any yield penalty.
• 10:06
  SPEAKER_01: Um, you know, one thing I I think is important is think back to this past year, 24 spring.
• 10:12
  SPEAKER_01: We had a lot of rain early.
• 10:15
  SPEAKER_01: If I planted corn on corn with maybe limited tillage, uh now that excess, the the trash on top of the ground held all that moisture, that's generally not conducive to getting a corn crop off to a fast start, especially in in our environment north, where soils tech tend to take longer to warm up.
• 10:35
  SPEAKER_01: Okay, so not only do we have to get it planted in dry, good conditions, then we got to get the right amount of rain, and then we have to battle disease and insect pressure because that's why farmers plant rotation is to break the insect cycle, break the weed cycle, break the disease cycle.
• 10:53
  SPEAKER_01: When you do a continuous crop, of course, you you don't break it.
• 10:56
  SPEAKER_01: You have to fight all those diseases and insects as well.
• 10:59
  SPEAKER_01: So then we have to make sure we're putting inputs in place to protect it as much as possible.
• 11:05
  SPEAKER_01: That so can high yields be achieved first year corn on corn?
• 11:09
  SPEAKER_01: Yes.
• 11:10
  SPEAKER_01: It just takes like a perfect growing everything's gotta work out.
• 11:13
  SPEAKER_01: Everything's gotta work out, and you're just if something doesn't work out, you'll see and feel the effects larger on a on a corn on corn acre versus a corn on soybean acre.
• 11:24
  SPEAKER_01: Uh the other part of it, and I know uh you talked a little bit about this before of the logistics of corn on corn.
• 11:30
  SPEAKER_01: Uh corn harvest, it takes a lot more people, it takes a lot more equipment, it takes a lot more fuel.
• 11:35
  SPEAKER_01: It happens later in the year.
• 11:37
  SPEAKER_01: Uh if I have more corn acres, now am I more suspect to not getting harvest finished before winter weather sets in?
• 11:45
  SPEAKER_01: Uh, what if the crop is slow to mature?
• 11:48
  SPEAKER_01: Now I have drying cost.
• 11:50
  SPEAKER_01: Can my drying setup and grain sit system handle the excess bushels that I normally don't have if I'm following a rotation?
• 11:58
  SPEAKER_01: Um so those are considerations you have to think about now, rather than just like, well, the ratio says I should plant corn on corn, so I should plant it.
• 12:06
  SPEAKER_00: Especially when money's tighter to going into this next year, higher capital uh requirements with more tillage and extra um money into seed, like you talked about.
• 12:15
  SPEAKER_00: So I I mean if you're spending 50 bucks more an acre, uh that matters as well.
• 12:19
  SPEAKER_01: And interest rates are still pretty high, so you're gonna have more money tied up, longer periods, probably more fungicide and set insecticide passes.
• 12:27
  SPEAKER_01: Although, you know, let's face it, soybeans take a lot of fungicide insecticide to grow uh profitably as well.
• 12:33
  SPEAKER_01: So there are a lot of operational side of corn on corn that uh it's not as easy as just looking at something and doing it.
• 12:41
  SPEAKER_01: Um and all those have to be considered before making that final decision.
• 12:45
  SPEAKER_01: And of course, what no matter what you plant, Mike, we got to think about how we protect that dollar and and protect the investment we have in the crop and try to protect profitability.
• 12:54
  SPEAKER_01: What are some things you're looking at on that risk management side that could help us out if we decide to do more corn?
• 13:01
  SPEAKER_00: Yeah, so corn, if we do more, you're gonna have to protect more on price, and uh it's it's imperative that it probably happens quicker or sooner.
• 13:09
  SPEAKER_00: Um so one of the things, one of the nice parts about corn on corn right away, making that decision is that today you're not far off from being able to make some transactions here at these price levels.
• 13:21
  SPEAKER_00: You're close to break-even levels already.
• 13:23
  SPEAKER_00: Um there's a lot of viable options out there.
• 13:26
  SPEAKER_00: Like buying a 450 put and selling a$5 call for 2025 for 10 cents on a little bit of a rally, is something that can uh is an example of putting a floor in with uh upside to five bucks on your futures.
• 13:40
  SPEAKER_00: And if uh and if that uh does get you in trouble and we go above five, uh, you know, we've uh walked into a good situation planting more corn anyways.
• 13:49
  SPEAKER_00: So uh that's part of it.
• 13:51
  SPEAKER_00: That's the nice part about doing corn on corn today is that from a marketing perspective, you've got options today that make sense.
• 13:58
  SPEAKER_00: Both options and futures, uh, you know, alike.
• 14:01
  SPEAKER_00: Uh it doesn't take much of a rally to really make sense at this point on the corn market.
• 14:05
  SPEAKER_00: The soybeans, there's no right answer really.
• 14:07
  SPEAKER_00: I mean, the puts are expensive, uh, the calls you want to sell are probably a little bit low relative to where your breakevens are.
• 14:14
  SPEAKER_00: Uh you're what, a buck, two bucks below break-even levels for a lot of operations at these levels.
• 14:20
  SPEAKER_00: So uh the nice part is if you do rotate more corn to corn, then your exposure on the soybeans maybe isn't as large, especially if you already got soybeans hedged, then your percent sold went up at a higher level, too.
• 14:33
  SPEAKER_01: Yeah, that's a that's a good point.
• 14:34
  SPEAKER_01: Of if you do have more corn-on-corn acres, that's less of a problem I have marketing my beans.
• 14:39
  SPEAKER_00: Yeah, which that's a that's a real problem this year.
• 14:41
  SPEAKER_00: Don't don't kid yourself.
• 14:43
  SPEAKER_01: And and so one of the things we've talked about that internally on marketing beans for 25 is is kind of relying on our crop insurance policies.
• 14:50
  SPEAKER_01: Much more.
• 14:50
  SPEAKER_01: Uh heavier, especially early on, just waiting for opportunities to to maybe present themselves, right?
• 14:56
  SPEAKER_01: Of a weather scare in the US, a weather scare in South America, something in the world to happen to spur that price.
• 15:03
  SPEAKER_01: And the other side of the crop insurance discussion is uh with low prices and low volatility in the soybean market, and an increased subsidy on ECO coverage for this coming year, you know, you can put a pretty good crop insurance package together to help protect price on soybeans pretty inexpensively.
• 15:23
  SPEAKER_01: Yeah.
• 15:24
  SPEAKER_01: And I think that's important that I think a lot of guys will fall into is yeah, maybe right today, uh penciling out, looking at my soybean breakevens, I'm gonna lose 70 bucks an acre, 100 bucks an acre on paper uh if I plant an acre of soybeans.
• 15:41
  SPEAKER_01: Crop insurance can help you like minimize the loss, right?
• 15:44
  SPEAKER_01: It's not gonna help you make money uh this year, it's not gonna bring you into profitability, but at least you know your downside is capped.
• 15:52
  SPEAKER_01: And so if you can't handle all the extra operational part of corn on corn, at least it's a way that, hey, I can buy high levels of protection, it's not gonna cost me that much money, especially compared to a year ago, uh, and it can really protect my downside risk.
• 16:08
  SPEAKER_01: Uh, and then I'm gonna wait and see what happens with the weather and with the rest, what the rest of the farmers in the US decide to do, and maybe we can get a little bump in the soybean market.
• 16:17
  SPEAKER_00: That's what I like.
• 16:18
  SPEAKER_00: I like to go about it that way for a lot of uh people that I'll be working with probably, but uh one valid point there or consideration in that uh strategy is that we've got to make it to February.
• 16:32
  SPEAKER_00: Yeah.
• 16:33
  SPEAKER_00: So I mean uh we do have some price risk until we get that crop insurance price set in.
• 16:38
  SPEAKER_00: The good news, normally you go up this time of the year off South American weather problem, and you know, it's and or it's pretty flat.
• 16:45
  SPEAKER_00: So that's the good news.
• 16:46
  SPEAKER_00: The bad news is, you know, Trump administration, end of January, who knows what'll happen.
• 16:50
  SPEAKER_00: You're at uh you got some exposure to that.
• 16:53
  SPEAKER_01: So Yep, that's a good point.
• 16:54
  SPEAKER_01: We by until we get to mid-February, we aren't gonna know a very good idea where that price is gonna come.
• 16:59
  SPEAKER_00: Problem is I'm probably not doing a whole lot till then, anyways.
• 17:01
  SPEAKER_00: So, I mean, uh, to each their own.
• 17:03
  SPEAKER_00: But thank you for your time today, Lucas.
• 17:05
  SPEAKER_00: I appreciate it.
• 17:06
  SPEAKER_00: And uh can't wait for next time.
• 17:08
  SPEAKER_00: Have a happy new year, Mike.
• 17:09
  SPEAKER_00: You as well.
• 17:10
  SPEAKER_00: And thank you to all our listeners.
• 17:12
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 17:15
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 17:20
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 17:27
  SPEAKER_00: See you next time.