Power Hour: Corn Profits Best Soybeans for 2013

February 22, 2013 08:30 AM
Power Hour: Corn Profits Best Soybeans for 2013

Corn is more profitable than soybeans for 2013 any way you slice the numbers. Taking a longer-term view, however, planting more corn in 2013 could actually reduce overall profits in future years, according to an analysis by Gary Schnitkey, University of Illinois ag economist.

Using 2013 corn prices of $5.70 and soybean prices of $12.80, operator and farmland returns for highly productive central Illinois land in 2013 are $643/acre for corn following soybeans but $571 for corn following corn due largely to a yield drag. Soybean returns, meanwhile are $446/acre for soybeans following corn, but higher, $471 for soybeans planted after two years of corn. "Evaluating corn versus soybeans in a one-year context suggests planting corn," Schnitkey acknowledges.

However, continuous corn is not the most profitable option year in, year out. Schnitkey found a $545 per acre return for a corn/soybean rotation (an average of $643 return for corn after soybeans and $446 return for soybeans following corn). This is not the most profitable rotation option.

A $17/bushel advantage or $562 per acre return is gained with a corn/corn/soybeans rotation (an average of a $643 return for corn following soybeans, $571 for corn following corn, and $471 for soybeans following two years of corn. The lowest return is $525 per acre for continuous corn. The only way for continuous corn to be most profitable is for it to avoid yield drag.

"While planting more corn in 2013 may be more profitable, it may require giving up returns in future years," Schnitkey says. Moreover, he notes that reports of corn following corn having 40 bushels lower yields are not uncommon. "Planting more corn in 2013 can result in lower returns in 2014."

Looking at 2013 alone, he notes that the corn following corn has returns of $571 per acre is $125 per acre higher than soybeans following corn in the example. This spread is large compared to the historical average. From 2006-11, corn was on average $58 per acre more profitable than soybeans in Illinois.

This analysis assumes corn following soybeans with a yield of 198 bushels per acre, corn following corn 188 bushels per acre, continuous corn 180 bushels per acre, soybeans after corn 57 bushels per acre, and soybeans after two years of corn 59 bushels per acre.

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