So you are going to plant more soybeans this year, you say? Half of your acreage? More than half?

Mad at anhydrous ammonia prices and planting 100% soybeans? Booked beans for $13 and planning on retiring? Well, we’ll all find out next Monday morning when USDA releases its Prospective Plantings Report, and then it will be time to make adjustments if your intentions are different than what the market wants. Instead of gut feelings, have you penciled out the revenue returns? We have, and they may be different than what you think!

Your acreage decisions should be based on relative profitability of corn and soybeans say Gary Schnitkey and Darrel Good, University of Illinois agricultural economists, whose latest newsletter will make many Cornbelt farmers rethink any radical cropping decisions for 2008. Granted, Schnitkey and Good looked at Illinois farm returns, but their findings were consistent across all 9 crop reporting districts in Illinois and those will probably be representative of nearly all of the Cornbelt.

They found that corn income exceeded soybean income anywhere from $230 to $277 per acre. Schnitkey and Good used trendline yields and March 20 bids for beans and corn, which ranged from $4.70 to $4.90 for corn and $10.61 to $11.06 for soybeans. Yields throughout the study ranged from 132 to 173 bushels for corn and from 36 to 52 bushels for soybeans.

If you are questioning crop production costs, you will be interested to know that Schnitkey and Good created crop budgets for last fall and this spring, comparing crop income and rising production costs. Last fall, the non-land production costs were projected at $364 for corn and $215 for soybeans, which favors corn by $149. The numbers were recalculated this spring with anhydrous ammonia prices rising from $580 in the fall to $700 in the spring. The spring budget put non-land costs at $389 for corn and $227 for soybeans, which favors corn by $162.

Even with the increased nitrogen cost, soybeans are still less profitable than corn. Schnitkey and Good acknowledge that $700 may still be less than what farmers had to pay for a ton of anhydrous ammonia. However they say a $100 per ton increase will only increase per acre costs by $8.90, and that will not eliminate the advantage that corn has on crop returns per acre.

Schnitkey and Good calculate a 50/50 rotation to provide a $488 per acre average revenue. Increasing corn acreage to 2/3 provides a $498 per acre average revenue. And planting 100% corn provides a $520 per acre average revenue.

The economists also provided some qualifiers, and said the relative corn and bean price could change and that would impact the profitability projection. Any variance in yield will impact the revenue, and there will be some minor adjustments for yield drag on corn following corn. Additionally, pestilence is a risk that would need to be managed at some unknown cost.

Summary:

Even with expectations for high soybean prices and good revenue per acre, many Cornbelt farmers may find more profitability in corn than had been expected. Even with higher production costs, corn revenue substantially outdistanced soybean revenue in all sectors of Illinois, which indicates a reasonable cross section of the Cornbelt. Even with more soybean acres expected in 2008, conservative crop budgets and spring pricing opportunities many farmers may find corn to produce more revenue than anticipated.

Stu Ellis

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