ABSR Research: Chart of the Day
Yesterday in our soybean comments we mentioned keeping a close eye on the spread between soybeans and corn, today we want to dive a little deeper. The price ratio of soybeans and corn is a key metric for producers as it influences planting decisions and ultimately production. But the ratio can also give us some insight into potential key marketing levels. Not only does this ratio give us a technical perspective, there are real economic fundamentals behind the ratio. Today’s chart of the day is the weekly spot (central IL) soybean/corn ratio over the past two years. With the weekend news on China trade policy, growers should have levels or triggers set to initiate sells or hedges. A simple chart of soybeans offers some data, but the ratio chart is a better option for making decisions between soybeans and corn. Here are levels we view as significant: The first level, marked by the dashed yellow line just above 2.50, is what we would consider more of a trend reversal indicator. We don’t want to initiate soybean sells until the ratio has cleared the 2.50 level and “turned the trend”. The second level and where you might focus a first round of soybean selling is 2.70. This is the bottom of the range prior to the trade war sell-off and should act as resistance. The last time we were at that level, beans (Central IL) were trading $9.30-$9.85 and corn $$3.45-$3.63. The next level just under 2.90 is the range highs right before the tariff battle. Here, beans were trading $10.00 and corn $3.50. Lastly and what I suspect is a long shot unless corn prices fall apart or an rapid end to the dispute materializes, is the two year high just above 3.00.
Shawn Bingham, CAIA
Source(s): ABSR Research, Commodity Systems Inc.
The ABSR Research: Chart of the Day is a caption from our daily Agriculture Edge Market Monitor newsletter. The full report includes statistical based commentary, graphs and data for the agriculture sector including: Corn, Soybeans, Wheat, Live Cattle, Lean Hogs, and Cotton. To learn more about our agriculture marketing platform click here. To register for a FREE, no obligation 30 day trail click here.
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