Profit Planning: Corn Versus Soybeans

December 24, 2018 04:05 AM
 
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.

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. 

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Comments

 
Spell Check

Todd Delay
Columbus, OH
12/24/2018 06:55 AM
 

  I feel with acceptance of false statements made starting from the top this notion we should plant more corn and less beans is almost comical . Simply stated a bean corn ratio 2.38 does not favor corn in many areas ! Sharply higher fertilizer costs 40’dollars per acre added to corn input affectively puts it 2.5 .please state the obvious new crop beans are attractively priced vs new crop corn ! It may behoove is to increase bean production , hedge in November 19 futures reduce corn acreage and market hopefully at profitable levels and put an end or strain in expanding S American acreage. Ramifications of trade wars will likely be severe for Ag. Instead of sending global signal to reduce oilseed acreage the opposite occurs because of premiums temporarily received for S hemisphere soybeans . 9.50 Nov 19 beans is a very attractive price for beans and a level we’ve been well below previous years with much tighter ending stocks . The markets not telling you to expand corn acres , hopefully farmers realize this and don’t ruin the potential for a potentially improving global corn balance sheet and profitable 2019-20 corn crop of prudence prevails .

 
 
PJ Jahn
Ptown, IL
12/24/2018 11:14 AM
 

  Bingo!!! You are spot on Todd!!! They can stick the inflated input cost up their ---!!!!!!!!! Everything that the trade war has done so far, will do nothing but encourage more S.A. production!!!!!!!!

 
 
Ron Olson
FAIRBURY, NE
1/19/2019 07:12 PM
 

  Great discussion on corn vs. Beans.

 
 
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