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Power Hour: Know Your Risks in Planting Corn in 2013

January 24, 2013
Corn Seed Bags
  

By Gary Schnitkey, University of Illinois

Courtesy of farmdocdaily

In the next several months, planting decisions will be finalized, with one of the central question being how much corn will be planted. Herein, the corn versus soybean planting decision for 2013 is examined for high-productivity farmland.

If more corn acres are to be planted in 2013, more corn likely needs to be planted on high-productivity farmland. In most cases, switching to more corn on high productivity farmland means a reduction in 2013 soybean acres. While planting corn is projected more profitable in 2013, a longer run perspective indicates that planting more corn in 2013 may reduce profits in future years.

Single Year Budgets

Budgets for central Illinois farmland with high-productivity are shown in Table 1. These budgets are for the following crop--previous crop combinations having the following yields: corn-after-soybeans with yield of 198 bushels per acre, corn-after-corn with 188 bushels per acre, continuous corn with 180 bushels per acre, soybeans-after-corn with 57 bushels per acre, and soybeans-after-two-years of corn with 59 bushels per acre.

Commodity prices represent current bids for fall 2013 delivery: $5.70 per bushel for corn and $12.80 per bushel for soybeans. Non-land costs total $510 per acre for corn-after-soybeans, $525 per acre for corn-after-corn and continuous corn, and $308 per acre for soybeans-after-corn, and soybeans-after-two-years-corn.

Note that corn is more profitable than soybeans in all cases shown in Table 1. Operator and farmland returns are $643 per acre for corn-after-soybeans, $571 for corn-after-corn, and $525 for continuous corn while returns for soybeans are $446 for soybeans-after-corn and $471 for corn-after-two-years-corn (see Table 1). The lowest corn return - $525 for continuous corn - is $54 per acre higher than the highest soybean return - $471 for soybeans-after-two-years-corn. Evaluating corn versus soybeans in a one year context suggests planting corn.

Crop in Rotations

Evaluating cropping decisions in a single year context does not consider the impacts of current planting decisions on returns in future years. If, for example, all farmland in 2013 is planted to corn, there will be no possibility of planting corn-after-soybeans in 2014 as there were no soybeans in 2013. Planting soybeans in 2013 allows for a 2014 planting of the most profitable corn crop, corn-following-soybeans.

These sorts of decisions can be evaluated by calculating the profitability of rotations. Profits are calculated for three rotations:

  1. Corn-soybeans rotation. Half the acres are corn and half are in soybeans. Corn follows soybeans and soybeans follow corn.
  2. Corn-corn-soybeans rotation. Two-thirds of the acres are in corn and one-third is in soybeans. Corn follows soybeans on half the corn acre and corn follows corn on the other half of corn acres. Soybeans follow corn.
  3. Continuous corn.

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