Power Hour: Bright Corn Profit Prospects for 2013

September 7, 2012 09:31 AM
Power Hour: Bright Corn Profit Prospects for 2013

For 2013, corn returns are $244 higher than soybean returns.



Profit projections for 2013 corn call for another profitable year, according to University of Illinois (U of I) budgets for the upcoming year. The 2013 operator and farmland returns for corn are forecast at $654 per acre, higher than the 2011 return of $573 per acre, but below projected 2012 returns of $699 per acre.


Soybean returns for the upcoming year are projected to be $405 per acre, below returns forecast for 2012 at $484 and slightly below 2011 returns of $419 per acre. These corn and soybean projections are for highly productive farmland in central Illinois. Trend-line yields are projected for 2013 at 195 bushels for corn and 57 bushels for soybeans.

The budgets use $6/bu. corn and $12.50 soybean prices, based on present futures. "A major difficulty in projecting 2013 returns is determining prices to use in the budgets," acknowledges U of I economist Gary Schnitkey, who developed the budgets. "These prices could change a great deal between now and harvest-time 2013, resulting in large changes in profitability," he adds.

Power HourThe budgets project non-land corn costs of $516 per acre, $4 less than 2012 costs. Fertilizer costs are projected to be $155 per acre, down $10. Offsetting fertilizer declines are $2 increases in pesticide costs of $52 in 2013 as well as $2 per acre higher seed costs at $100; and $2 per acre higher machinery depreciation at $43.

Non-land costs for soybeans for 2013 are projected to be $308, $2 higher than 2012. Fertilizer costs are expected to be $53 per acre, down $5; pesticide costs of $33, up $2 from 2012; seed costs also are projected to be $2 per acre higher, at $65 for 2013; and machinery depreciation is forecast to be $42 per acre, up $3.

For 2013, corn returns are $244 higher than soybean returns. "This difference is large compared to historical averages," Schnitkey says. Between 2005 and 2011, corn minus soybean returns averaged $75 per acre. He says the reason for the wider spread for 2013 is because at present, a wide price spread exists between corn and soybeans prices.

From 2006 through 2012, the soybean to corn price spread averaged 2.38, but was 2.08 in 2012. "Whether these relative prices persist into 2013 is an open question," Schnitkey says. Some analysts say that either corn prices must come down or soybean prices must go higher.



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