Expectations that soybean prices may decline relative to corn prices in the long-term have led many Illinois producers to consider shifting more acres into corn at the expense of soybeans.  That is not a good idea, according to a recent University of Illinois Extension study.

"While long-run conditions may favor growing more corn and fewer soybeans in Illinois, planning prices for 2004 harvest time do not suggest shifting more acres to corn, particularly for northern and southern Illinois," said Gary Schnitkey, a U of I Extension farm management specialist who wrote the report, "Projected and Historical Crop Returns:  Keep Soybeans in 2004.

The report, which appears in the Farm Economics:  Facts and Opinions portion of the farmdoc. website may be viewed at:  http://www.farmdoc.uiuc.edu/manage/newsletters/fefo03_19/fefo03_19.html .

Using data from the Illinois Farm Business Farm Management Association (FBFM), Schnitkey examined crop revenue performance for northern, central, and southern Illinois after subtracting variable costs for corn, soybeans, and wheat.

"The projections for 2004 are based on five-year average yields and commodity prices of $2.25 for corn, $5.70 for soybeans, and $3.40 for wheat," he said.  "These prices were determined by subtracting basis from prices for Chicago Board of Trade futures contracts."

Schnitkey's study indicated a 2004 switch to more soybean acres may not be a profitable option.

"Projected returns from corn, soybeans, and wheat for northern, central, and southern Illinois do not suggest large shifts away from soybeans to corn," he said.  "For northern Illinois, a one-half corn/one-half soybeans rotation is projected to be the most profitable. 

"For central Illinois, planting corn following corn may increase profits; however, there may be long-run reductions in returns due to increasing the percentage of corn in the rotation.  For southern Illinois, soybeans are projected to be more profitable than corn.  Wheat with double-crop soybeans is an attractive alternative."

He noted that the projections could be altered by changes in either relative yields or relative prices.

"Based on historical returns, including higher percentages of corn in a rotation is likely to increase the variability of returns," he said.  "If more corn is included in the 2004 rotation, it would be prudent to consider countering this increase in risk by increasing crop insurance coverage or by increasing use of pre-harvest hedging."