Will Corn, Soybean Profits be Higher in 2011?

November 16, 2010 09:47 PM

The 2010 Marketing Rally will be help Dec. 1-2 in St. Charles, Ill. Sixteen marketing experts will be featured, as they provide advice and analysis to help you plan for your 2011 marketing season and beyond.

AgWeb asked these experts:

Do you think 2011 corn profits will be higher or lower in 2011 than 2010? Will soybean profits be higher in 2011 than 2010?

Assuming disciplined risk management strategies are implemented, we believe that both corn and soybean profits will be higher in 2011 than 2010.
Most producers will experience a net gain on revenue in 2011 if they manage their risk early in the year. Once acreage is established, without a weather problem or confirmation of speculative led inflation it would be difficult to keep people coming to the party.
Corn prices are ~$1.50/bu higher than $3.78 average futures price 1 year ago. Forward pricing and hedging opportunities this year will generate tremendous opportunity to lock in profits. The cost side is increasing and until rents are established we probably will not know for sure the net revenue potential. Soybean prices are ~$2.00/bu higher than the $10.00 average price of futures 1 year ago. Thus the earning potential is good for 2011 in both corn and beans. Overall average costs are not expected to accelerate to the same degree as gross income based on current prices. One note, this could be the end of the game. Long term policy decisions in Washington could cause costs to accelerate while commodity prices lose momentum. Thus a revenue squeeze is possible over the next 2-3 years if producers are not conservative in their risk management plans.
I think corn profits for 2011 will be lower than we saw in 2010. I think soybeans will be lower in 2011 than in 2010. I think the overriding factor to the market right now is very much what happens in Brazil, Argentina, Paraguay and Uruguay in the month of December. We think there is a possible threat from an La Nina effect there.
2011 profits will be down slightly in both corn and soybeans.
Corn profits: Tough call... a lot of the 2010 crop was sold close to $5... and we’ll pre-sell a lot of the 2011 crop close to $5.00 (or higher). The variable will be 2011 yields. If you “trust” the analysis that the current La Nina is similar to the fall of 1973, I’d have to say 2011-crop revenues could be lower simply because yields could be lower next year than they were this year.
Bean profits: No. Bean profits will probably be lower based primarily on expectations of “comfortable” carryover and the likelihood of lower 2011 yields.
Profitability will be higher in 2011 if producers take advantage of the opportunities. There are potential very high profits awaiting producers but the window maybe smaller than they think.
I think both corn and soybean profits will be higher in 2011.
The potential for profits in both crops will be higher in 2011, it will depend if producers take advantage of the situation.
Profits in 2011 on corn and soybeans are a tough call. Tell me what the weather is going to do. Will we have a drought? I think 2011 is a year to go full bore on crop insurance. We are currently 22 years without a drought and 23 years is the longest and the last weather maps I have seen (as of Oct. 1) the drought is moving from the SE towards the NW already into Illinois north to south.

Mike North, First Capitol Ag
Generally, cost of production lags the lead in grain markets. At this point, profits will likely be higher.
Profits for 2010 and 2011 are a tricky story. Problem No. 1, many farmers didn't get the yield in 2010. You can have very high prices, but it doesn't do a good job of making up for a loss of 20-50 bushels against your yield. We had lower expenses than we've seen for a couple years, which help, but the yield shortfall is really going to cut into most farmers’ profitability.  2011 will start with much higher costs; rent and fertilizer being the big gainers.  We also start with a corn price in the 5 dollar area, which counterbalances much of the increases cost. As long as we have good yields 2011, we have a very good chance to be much more profitable than 2010. 
The biggest variable for crop profitability next year is whether producers locked in their fertilizer costs before last Friday when prices started to skyrocket. If key input costs were locked in, next year should be a more profitable year than this year. That said, input costs are one aspect of the profit equation--yield another, marketing decisions yet another. The futures levels are better than last year’s figures on both corn and beans, so the potential is there to be more profitable. When planning for 2011, the biggest variable is where the level of fear will peak, and that’s difficult to gauge. It’s not a point on a chart or a fundamental to track. Fear is the main factor driving all markets--inputs and crops. Fear creates volatility. Producers who can make disciplined decisions in this kind of pressure-cooker environment will be the most profitable next year.

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Spell Check

11/17/2010 08:27 AM

  There are three key variables to determine how profitable the farm operation will be for 2011: 1. What is your yield 2. What are your costs 3. What is the price for your crop Right now, you can lock in good prices for 2011, the remaining variables probably will not be know until next year, so it will be tough to call.


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