(Agri-View) – U.S. farmers increased corn planting in 2016 by 7 percent while increasing soybean planting just 1 percent. These changes come after three years in which soybeans have been more profitable than corn in Illinois, suggesting soybean acres should have increased more than corn. Crop return projections made in February 2016 didn’t suggest a large shift to corn acres and June projections of 2016 crop returns indicate that soybeans will be more profitable than corn. Given this history, farmers may want to consider switching acres from corn to soybeans in 2017, particularly on acres where corn follows corn.
Of course 2017 prices and cost projections will impact the advisability of switching. As benchmarks, soybeans likely will bring higher returns than corn next year if 2017 corn prices are below $4 or non-land costs for corn do not decrease substantially.
Profitability analyzed
In “Revenues and Costs for Corn, Soybeans, Wheat and Double-crop Soybeans,” returns are computed for corn and soybeans grown in northern Illinois, central Illinois and southern Illinois. Central Illinois is further divided into high-productivity farmland and low-productivity farmland. These data are summaries of returns from farms enrolled in Illinois Farm Business Farm Management.
On average, soybeans were more profitable than corn in Illinois from 2013 to 2015, differing from 2000 to 2012 when corn typically had higher returns than soybeans. Using trend yields and prices of $3.85 per bushel for corn and $10.60 per bushel for soybeans, 2016 soybeans are projected to be more profitable than corn – see “2016 Illinois Crop Budgets.”
Soybeans have been more profitable than corn since 2013 for two fundamental reasons – non-land costs for corn increased more than soybean costs and commodity prices decreased in 2013. In central Illinois, non-land costs for corn increased $288 per acre from 2006 to 2015 while soybean non-land cost increased by $156 per acre.
As long as prices were high, the relative cost increases didn’t cause corn returns to fall below soybean returns. Between 2010 and 2012, corn averaged $6.08 and soybeans averaged $13.06 per bushel. Prices declined in 2013. In 2014 and 2015, corn averaged below $4 per bushel and soybeans averaged below $10.70 per bushel. At lower prices, not only did revenue for both crops decrease, but corn revenue decreased more than soybean revenue.
Several factors could again cause corn to be more profitable than soybeans in 2017. Two factors include:
- Commodity prices increase — at prices above $4 per bushel, corn returns likely will be higher than soybeans given that soybean-to-corn prices remain near historical levels. Compared to historical soybean-to-corn ratios, soybean prices are much higher than corn prices. The $3.85 corn price and $10.60 soybean price used in projections implies a soybean-to-corn price ratio of 2.75, well above the historical soybean-to-corn ratio average for cash prices of 2.55.
- Costs for corn decrease relative to soybean costs — Using 2016 projections as a guide, non-land costs for corn must be reduced by $70 to $100 per acre, depending on the region of Illinois –
- . If these relative reductions occur, they most likely will come from lower seed costs or lower nitrogen-fertilizer costs.
A combination of these two factors also could cause corn to be more profitable than soybeans.
The relative profitability of corn versus soybeans comes into focus because of increased acreage planted to corn in 2016. In the June 2016 Acreage report, the U.S. Department of Agriculture’s National Agricultural Statistical Service reported that farmers planted 94.1 million acres of corn in 2016, 7 percent more than the 88 million acres planted in 2015. Meanwhile, soybean acres increased just 1 percent – from 82.7 million acres in 2015 to 83.7 million acres in 2016. Given the relative profitability of the two crops in recent years and the projections of returns made earlier in the year, one would have expected more of an increase in soybean acres and less of an increase in corn acres.
Suggestions made for 2017
As farmers begin to make 2017 planting decisions this fall, they may want to evaluate their relative corn and soybean plantings, perhaps shifting acres from corn to soybeans. In 2016 llinois farmers planted11.7 million acres of corn and 9.9 million acres of soybeans, suggesting that many Illinois farmers plant corn-after-corn on a portion of their acres. Switching acres to soybeans may result in higher returns – see corn-after-soybeans and corn-after-corn budgets in “2016 Illinois Crop Budgets.”
Soybeans likely will be more profitable than corn if projected corn prices are below $4 per bushel, given that historical soybean-to-corn price relationships hold. Sizable reductions in corn-seed prices and nitrogen prices also could impact planting decisions.
The large increase in corn acres in 2016 also may influence input prices. Seed and fertilizer costs are considerably higher for corn than for soybeans. Hence, the revenue to input suppliers will be higher if acres switch to corn.
Given recent declines in prices and an improving crop outlook for the Midwest, one cannot be very hopeful for commodity price relief to occur this fall. The outlook will become clearer as the level of 2016 yields becomes more certain. Given relatively good yields, prices below $4 per bushel for corn could continue into 2017. If that is the case, reducing costs will continue to be important, and planting and cash-rent decisions for 2017 will need to be made with great care.
