CNS Canada — The widening spread between corn and soybean futures at the Chicago Board of Trade (CBOT) should be supportive for corn but a bearish factor in soybeans, as the two crops have moved in opposite directions over the past week, according to an analyst.
Soybeans moved to their highest levels in a month during the week ended Wednesday, while the good U.S. planting weather dragged corn down to six-month lows.
Terry Reilly of Futures International in Chicago said corn could be headed lower still, with the US$3.60 per bushel level a nearby downside target in the July contract.
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However, he said, soybeans would now need to move lower as well to keep corn pointed down.
July soybeans are currently within a broad range between US$9.50 and $10.
“In order for corn prices to break below $3.60, we’ll need to see bean prices trend back down to the $9.60 area,” said Reilly.
That was a likely scenario, he said, if there was a big jump in U.S. soybean seeding progress in the next weekly report, as expected.
The soybean/corn ratio is very large, and should narrow in, said Reilly. “It’s hard to sustain a soybean/corn ratio at 2.69 when demand is expected to fall out of bed for soybean meal,” he said, reiterating there was only limited downside risk for corn without a move lower in soybeans.
Great U.S. weather and the advancing South American harvest will keep the global balance sheet oversupplied when it comes to soybeans, according to Reilly.
Meanwhile, he said, weekly export data seems to be improving for corn, which is somewhat supportive as the U.S. dollar erodes and the six-month lows bring in bargain hunting.
The possibility of fund short-covering, together with labour unrest in parts of Brazil and Argentina slowing export movement, could also be supportive for soybeans in the short term.
However, the longer-term relationship between the two commodities should see the price spread between soybeans and corn narrow in.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.
