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Forward prices for 2008 slanted toward soybeans

Futures prices continue to be explosive and the market continues to try and bid for acres this coming spring.

USDA's Ag Outlook Forum a few weeks back provided the first glimpse of 2008 acreage prospects. Corn estimates by USDA totaled 90 million acres versus 93.6 million planted in 2007 while soybean acres are expected to rebound to 71 million verses 63.6 million in 2007.

Currently, new-crop Chicago futures are trading a soybean-to-corn price ratio of about 2.45. Although this can vary widely as the markets gyrate significantly, it still is up from last year's value at planting time of about 2.3. In other words, the market is encouraging more soybean acres as compared to last year.

While futures price help guide the acreage decision by farmers, a critical point in decision-making is local basis. To get a sense of what farmers are facing for grain prices from their local elevators, we have taken a snapshot of new-crop corn and soybean prices being offered for fall 2008 delivery. The map below shows the soy-to-corn price ratio for these forward prices. Farmers deciding to plant corn versus beans will see widely different basis levels in their neck of the woods which can influence planting decisions.

The regions in yellow on the map are on par with the national average of 2.50 while the green areas tend to favor soybeans more than corn (ratio of 2.55 or greater). Red regions tend to favor more corn relative to soybeans (ratio less than 2.45).

Comparing these levels to what was being offered this time last year, the average U.S. soy to corn ratio was about 2.3 versus 2.5 being bid for 2008 crops. Most states are seeing significantly stronger soy-to-corn price ratios. Big moves have occurred in South Dakota and Missouri while Iowa, Minnesota and Michigan have seen the lowest improvement in soy-to-corn price ratios.

Futures prices continue to be explosive and the market continues to try and bid for acres this coming spring.

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