A soybean rally fueled by signs of easing U.S.-China trade tensions has added a wrinkle to the plans of some farmers to shift more acres to corn.
On Tuesday, soybean futures closed at a premium of $5.375 a bushel to corn, the highest since June 18. The oilseed defied a slump in equities partly spurred by renewed U.S.-China trade concerns in industries outside agriculture. U.S. President Donald Trump and Treasury Secretary Steven Mnuchin signaled China will resume soybean purchases soon. Prices had slumped after the Asian country began to shun U.S. supplies in July.
The soybean-corn spread “plays an integral role in planting decisions for farmers,” Mark Recker, who raises both crops in Fayette County, Iowa, said Tuesday in a telephone interview. “I can tell you that guys are looking really hard at growing more corn.”
Recker said he planted 700 acres of soybeans (283 hectares) and 800 acres of corn this year. As of Tuesday, he intended to shift to 900 acres of corn and 600 acres of soybeans next season. Now, he’s waiting to see how the U.S.-China trade talks play out.
The spread rally “might continue as long as the trade believes we have a deal in China,” Ted Seifried, the chief market strategist at Zaner Group LLC in Chicago, said in a phone interview.
The Chinese government said Wednesday that it plans to move quickly on specific issues where a consensus was reached in trade talks over the weekend. Officials have been told to take the necessary steps for soybean purchases.
China is the world’s top soybean consumer, and the U.S. and Brazil are the top producers. The corn-soybean spread, based on the most-active futures contracts, closed at the 2018 low of $4.65 on Sept. 12. It reached the year’s high of $6.8925 on March 5.