Ratio for Wheat to Corn Spread Upside Down

WASHINGTON, DC – Wheat and corn prices tend to move in parallel, with cash and futures wheat prices historically being slightly above those for corn. For example, between August 2019 through March 2020, the average difference between futures contract prices of hard red winter wheat and yellow corn was about $0.58 per bushel, a typical price spread. However, when efforts to contain the outbreak of COVID-19 brought about widespread stay-at-home orders, wheat and corn prices began to diverge significantly. The widening spread came at a potentially impactful time for farmers, whose planting decisions could have been influenced by the perceived relative profitability of corn and spring wheat.

From the end of March through mid-May, the price difference for the leading wheat futures contract surged to $1.54 per bushel and well above the comparable average wheat-corn price margin. A spike in domestic retail flour, bread, and wheat-based product sales—related to greatly increased expenditures on food eaten at home—contributed to the observed wheat price increase. In contrast, stay-at-home orders significantly reduced fuel demand thus affecting corn – since roughly 10 percent of the fuel supply is corn-based ethanol. In the new marketing year, the margin between wheat and corn cash prices is expected to remain above the 5-year average, in part due to the continuation of COVID-19 related impacts on demand for wheat and corn products, and also due to contrasting supply expectations for each grain.
(SOURCE: Economic Research Service)