Soybeans Surge Ahead in Crop Revenue Picture for This Fall

October 30th, 2014

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Category: Grains, Oilseeds

Beans_Corn_Soy_Lentils450x2(Agriculture.com) – Recent projections have already foreshadowed the likelihood of higher returns for soybeans than corn next year. Now, the numbers are pointing to that same scenario much quicker than the 2015 crop.

Based on projected costs and the median prices projected in USDA’s World Agricultural Supply and Demand Estimates (WASDE) report earlier this month, soybeans will net more per-acre revenue than corn this fall, says University of Illinois Extension ag economist Gary Schnitkey. Neither crop will light the world on fire this fall, returns-wise, but the cost side of the equation will likely make soybeans the winner, provided yields wind up where the latest estimates have them.

“Unlike most years, soybeans are projected to be more profitable than corn in 2014. Those farms raising more soybeans this year will tend to be more profitable than those raising more corn,” Schnitkey says in a university report. “Total costs equal $588 per acre for corn and $372 per acre for soybeans. Operator and land return equals gross revenue minus total costs and represents a return to both the farmer and landowner. Operator and land return equals $210 per acre for corn and $328 per acre for soybeans. Soybeans are projected to have a $118 per acre higher return than corn.”

The economist projects, for the highest productivity land in his home state, gross revenue will be about $100 higher per acre for corn, but costs for that crop will exceed those for soybeans by more than $200 based on 2014 crop budgets and a 50-50 rotation between the two crops.

“Operator and land return equals gross revenue minus total costs and represents a return to both the farmer and landowner. Operator and land return equals $210 per acre for corn and $328 per acre for soybeans,” Schnitkey says. “Given projections, soybeans are projected to have a $118-per-acre higher return than corn.”

There’s wiggle room in the numbers that make these projections less than a sure thing, though: If corn yields exceed 250 bushels per acre or prices range closer to $4.00 a bushel, for example, corn will end up the winner. The same goes for soybean prices and yields. Schnitkey’s projections use an average soybean yield of 65 bushels per acre, but if those yields are closer to 50 bushels an acre — or prices slide south of $10 a bushel — corn will be the revenue leader this fall. But as the economist points out, these swings are fairly wide and will make it tough for corn to come out on top this fall.

“Differences in prices, yields, and costs impact relative returns between corn and soybeans. The sizes of [these] changes illustrate that soybeans will be more profitable than corn in most situations,” he says, adding cash rents will also have a profound effect on the revenue balance. “At a $300 cash rent, farmers receive a return for corn equal to $90 per acre. The farmer return for soybeans equal $28 per acre. At a 50% corn and 50% soybeans, operator and land return equals $269 per acre. Overall, a $31 loss occurs for a farmer given a $300 cash rent. Without soybeans, the return would have been much larger.”

These numbers could have implications well beyond when this year’s crop is in the bin and marketed. There’s already been a lot of talk among ag economists and market analysts that soybean acres could see a boost in 2015 from an increasingly imbalanced revenue picture for that crop vs. corn. Now, the numbers for this fall further affirm the assertion that farmers will plant more soybeans next fall.

“Unlike most years, soybeans are projected to be more profitable than corn in 2014. Those farms raising more soybeans this year will tend to be more profitable than those raising more corn. Having a higher return for soybeans is unusual and may have implications for 2015 planting decisions,” Schnitkey says, adding that local crop potential will remain critical in 2015 planting decisions. “The 2014 projections may hold implications for shifts in acres in 2015. Similar to 2014 returns, return projections for 2015 suggest that soybeans will be more profitable than corn. Central Illinois has a larger comparative advantage in corn production over soybean production than many other areas of the U.S. Hence, relative return differences between corn and soybeans likely are larger outside of central Illinois. Hence, economic incentives to switch acres outside of Illinois likely will be larger than those for central Illinois.”

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