Urbana, Illinois
December 17, 2007
Projections for 2008 by
University of Illinois
Extension indicate that corn production will be more profitable
than soybean production in northern and central Illinois but
soybeans take the edge in southern Illinois.
Prepared by Gary Schnitkey, U of I Extension farm financial
management specialist, the report, "Projected
Corn and Soybean Returns in 2008", is available on
Extension's farmdoc website. The complete report includes tables
and references to sources available to aid farmers in making
calculations.
"Significantly higher costs for corn production may cause some
farmers to switch acres from corn to soybeans," said Schnitkey.
"The purpose of the study was to project returns for 2008. Corn
returns minus soybean return, hereafter referred to as
corn-minus-soybean-returns, indicate that corn production may
have higher returns than soybean production on high productivity
farmland in 2008."
Schnitkey cautioned that changes in commodity prices could
change relative profitability. Returns will also vary across
farms. The projected 2008 corn-minus-soybean-returns are roughly
similar to averages observed from 2004 to 2007.
Corn-minus-soybean-returns were calculated for northern,
central, and southern Illinois. Central Illinois was further
divided into high-productivity farmland and low-productivity
farmland. Between 2004 and 2007, corn yields averaged 183
bushels for the central Illinois farms with high productivity
and 166 bushels for the low productivity category farms.
Data for the study was taken from farms enrolled in the Illinois
Farm Business Farm Management (FBFM) program. To be included in
the study, a farm had to receive a majority of its income from
grain operations.
"Returns for 2007 are not final and are based on yield, price,
and cost estimates," Schnitkey noted. "The 2007 results will
become 'final' when FBFM records are summarized in 2008."
During the period studies, corn-minus-soybean-returns were
lowest in 2005. That year, corn yields were below average while
soybean yields were near average. Corn-minus-soybean-returns
were highest in 2006. Both corn and soybean yields were above
average in 2006 and prices increased substantially over
historically average levels. In percentage terms, corn price
increased more than soybean price in 2006.
Indications that corn may be more profitable in 2008 may lead
some producers to plant corn after corn. Schnitkey recommended
that producers consider four points in making such a decision.
"Commodity prices will determine the relative profitability of
corn and soybeans," he said. "Recently, there has been a great
deal of market volatility that impacts relative corn and soybean
profits.
"Second, costs used to conduct this study are averages.
Individual farms can vary from these averages. Farmers should
use their own costs when analyzing cropping decisions. Third,
costs in budgets are assumed constant as acres in respective
crop changes. Planting more corn may necessitate equipment
changes that could increase costs, for example."
Finally, he noted that planting decisions in 2008 can have
profitability impacts in 2009.
"Due to yield drag and higher costs, corn-after-corn is
projected to be less profitable than corn-after-soybeans.
Planting more corn in 2008 could result in more corn-after-corn
in 2009, thereby lowering yields," he said. |
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