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"Planting all corn in 2007 likely will be more profitable than
planting soybeans on farms with high-productivity farmland,"
said Gary Schnitkey. "Revenue insurance at high coverage levels
can be used to lock in profits, thereby reducing risks from
planting all corn." Schnitkey based the conclusion on his
study,
"Why Not All Corn?" available on Extension's Farmdoc
website.
"Differences in corn and soybean yields across farms will
impact the advisability of planting all corn."
Schnitkey's study used Chicago Board of Trade futures
contracts, adjusted by basis. These indicate that reasonable
2007 projected prices are $3.80 per bushel for corn and $8 per
bushel for soybeans. These prices were used to project
corn-after-corn and soybeans returns. Costs and yields were
taken from U of I budgets for high-productivity farmland in
central Illinois.
"These budgets have a corn-after-corn yield of 170 bushels
per acre, a soybean yield of 55 bushels per acre and $25 per
acre of direct payments," he noted. "Total non-land costs are
$333 per acre for corn and $216 per acre for soybeans. Costs
include crop insurance premiums of $32 for corn and $18 for
soybeans, representing the costs of a crop revenue coverage
policy at an 85 percent coverage level."
Using these budgets, operator and farmland return is $338 per
acre for corn and $249 per acre for soybeans.
"These returns are above average," Schnitkey said. "From 1995
through 2005, operator and farmland return averaged $182 per
acre across all crops. Hence, the corn-after-corn return is $156
above average and the soybean return is $67 above average.
"The difference between the corn and soybean returns also is
very large. Corn return minus soybean return is $89 per acre.
Between 2001 and 2005, the difference in profitability between
corn and soybeans averaged $20 per acre. Hence, the $89 per acre
estimate is $66 above average."
Schnitkey noted that this $89 difference in profitability can
have large impacts on profitability across farms planting
various mixtures of corn and soybeans.
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There are risks involved in opting for the all-corn strategy.
"Planting all corn may result in lower returns than planting
soybeans under certain price and yield scenarios," he said.
"Scenarios that resulted in higher soybean prices were examined and
can be reviewed in the report online.
"Holding all other factors constant, situations where soybean
returns exceeded corn returns include: Soybean prices exceed $9.61
per bushel; soybean yields are above 66 bushels per acre; corn
yields are below 146 bushes per acre; and corn prices are below
$3.27 per bushel."
Planting all corn also raises some operational concerns.
"Planting will have to occur in a shorter time window, and yield
losses may occur if planting does not occur in this window,"
Schnitkey said. "Harvest may be more complicated. On many farms,
harvesting corn is slower than harvesting soybeans. There is a
possibility that planting more corn will complicate and lengthen the
harvest season. In years with adverse weather, lengthening the
harvest could result in yield losses.
"Production risks are increased. Since only one crop is planted,
any production problems related to diseases or pests have a larger
chance of impacting all acres."
Schnitkey added that there also may be concerns with the all-corn
strategy in future years. Planting all corn in 2007 means that there
will be no possibility of rotating corn onto land that was
previously planted to soybeans in 2008.
"Generally, corn-after-soybeans is more profitable than
corn-after-corn," he said. "The decision to plant all corn in 2007
could lower profits in 2008."
A Microsoft Excel spreadsheet entitled
"Corn-Soybean Rotation Tool" is available in the FAST section of
Farmdoc, he noted.
"An individual can use this spreadsheet to evaluate the
profitability of specific situations," he said.
[Text from file received from
the University of
Illinois Extension] |
