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Profit Planning: Corn Versus Soybeans

04:05AM Dec 24, 2018

With your cost of production side-by-side, you can weigh your options. The assumption corn will be more profitable than soybeans might not always be the case.( Farm Journal )

As we plan 2019, we face numerous strategic business considerations. Undoubtedly one of the most talked about decisions is our crop rotation. The overwhelming assumption is many soybean acres will be converted to corn. The macro situation surrounding the corn/soybean ratio makes it look like many of us would be better served to lean as heavy toward corn production as possible. Burdensome supplies and uncertainty with exports leave the soybean price outlook dismal at best. However, there is more to the story.

Before all this noise influences your decisions, dive into your numbers. We need look at some of the potential challenges if we shift too aggressively over to more corn acres. It’s tempting at this point to plan for additional corn acres, as corn planting versus soybean planting doesn’t impact the workload too much.

[USE THIS TOOL TO DETERMINE WHICH CROP WOULD BE MOST PROFITABLE FOR YOU]

Consider these questions: How many acres will you switch to corn? What is your expected yield? What is the increased capital requirement with more corn? Will you need more equipment or labor? Will your storage requirements change? Are there any agronomic considerations/costs? How will the additional bushels change your marketing plan?

Subtle changes on your rotation might not impact your operation much, but build a checklist to evaluate any likely bottlenecks.

The key element to consider is your capacity. For every acre you switch from soybeans to corn, your bushels and handling requirement can increase as much as 70%. For example, just a 500-acre corn increase can add 70,000 bu. of grain to manage in the fall. That same shift can easily add as much as $125,000 of operating capital/cash.

Once you’ve developed a preliminary crop plan, you can develop your marketing plan. It’s difficult to sell what you haven’t yet planned to grow. Plus, our opportunities to make sales tend to short. 

I’m not stating one rotation is better than another. I’m just emphasizing every operation is unique and running the numbers is a critical part to making the best decision for your operation’s profitability.