 Prepared by Gary Schnitkey, U of I Extension farm financial
management specialist, the "Projected Corn and Soybean Returns
in 2008"
report is available online. The complete report includes
tables and references to sources available to aid farmers in
making calculations."Significantly higher costs for corn
production may cause some farmers to switch acres from corn to
soybeans," said Schnitkey. "The purpose of the study was to
project returns for 2008. Corn returns minus soybean return,
hereafter referred to as corn-minus-soybean-returns, indicate
that corn production may have higher returns than soybean
production on high-productivity farmland in 2008."
Schnitkey cautioned that changes in commodity prices could
change relative profitability. Returns will also vary across
farms. The projected 2008 corn-minus-soybean-returns are roughly
similar to averages observed from 2004 to 2007.
Corn-minus-soybean-returns were calculated for northern,
central and southern Illinois. Central Illinois was further
divided into high-productivity farmland and low-productivity
farmland. Between 2004 and 2007, corn yields averaged 183
bushels for the central Illinois farms with high productivity
and 166 bushels for farms in the low-productivity category.
Data for the study was taken from farms enrolled in the
Illinois Farm Business Farm Management program. To be included
in the study, a farm had to receive a majority of its income
from grain operations.
"Returns for 2007 are not final and are based on yield, price
and cost estimates," Schnitkey noted. "The 2007 results will
become 'final' when FBFM records are summarized in 2008."
[to top of second column]
 |
During the period studies, corn-minus-soybean-returns were lowest in
2005. That year, corn yields were below average while soybean yields
were near average. Corn-minus-soybean-returns were highest in 2006.
Both corn and soybean yields were above average in 2006, and prices
increased substantially over historically average levels. In
percentage terms, corn price increased more than soybean price in
2006.
Indications that corn may be more profitable in 2008 may lead
some producers to plant corn after corn. Schnitkey recommended that
producers consider four points in making such a decision.
"Commodity prices will determine the relative profitability of
corn and soybeans," he said. "Recently, there has been a great deal
of market volatility that impacts relative corn and soybean profits.
"Second, costs used to conduct this study are averages.
Individual farms can vary from these averages. Farmers should use
their own costs when analyzing cropping decisions. Third, costs in
budgets are assumed constant as acres in respective crop changes.
Planting more corn may necessitate equipment changes that could
increase costs, for example."
Finally, he noted that planting decisions in 2008 can have
profitability impacts in 2009.
"Due to yield drag and higher costs, corn-after-corn is projected
to be less profitable than corn-after-soybeans. Planting more corn
in 2008 could result in more corn-after-corn in 2009, thereby
lowering yields," he said.
[Text from file received from
the University of
Illinois Extension] |
