With December 2008 corn futures above $4/bu., corn still appears to be potentially more profitable than soybeans in the heart of the Corn Belt for 2008.

The strength in competition for U.S. corn acres in 2008 will depend on the magnitude of increase in U.S. winter wheat acreage and the magnitude of increase in South American corn and soybean acreage.

In a perfect world, U.S. producers would forgo an increase in wheat acres and devote acreage to corn and soybeans, since a number of other countries can competitively produce wheat. That does not appear likely to happen, however.

The price of corn early in the 2007-2008 marketing year is much higher than a year ago. The average overnight cash bid in central Illinois was $3.15 in September 2007 compared to $2.21 in September 2006. The average in the first half of October 2007 was $3.13 compared to $2.61 a year earlier. For all of 2006-2007, the average daily cash bid in central Illinois was $3.33. This compares to the USDA estimate of the weighted average U.S. farm price of $3.04 for the 2006-07 marketing year.

For the current year, the USDA projects that the weighted average U.S. farm price will fall in a range of $2.90-3.50. With 20% of the 2007 U.S. crop likely already sold at an average price above $3/bu. and the futures market contracts for the 2007-2008 marketing year trading from $3.69 to $4.04, it seems likely that the average price for the year will be near the upper end of the USDA’s projected range for the average price. Daily cash bids over the next 10 months and beyond could trade in an extremely wide range of $1 or more.

Basis levels were generally very weak in the pre-harvest and early harvest periods, but strengthened somewhat as harvest progressed. Basis levels are still on the weak side by historic comparisons with some additional strengthening likely. Along with the relatively large carry in the futures market, there still appears to be a good return to farm stored corn in the form of basis appreciation.

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By Darrel Good, University of Illinois Extension economist