Corn on Corn Acres may be Shifting Back to Beans

Soybeans are projected to be $25 per acre more profitable than corn in 2006. Compiled by staff

Published on: Dec 12, 2005

Some shift from corn to soybeans appears likely in 2006 due to high input costs, according to Gary Schnitkey, a University of Illinois Extension farm management specialist.

A rise in nitrogen, energy and other costs are driving up the cost of corn, giving soybeans a $25 edge in profitability per acre, estimates Schnitkey.

Recent cost increases have reduced corn returns more than soybean returns and could reverse the recent trend of increasing corn production. A U of I study shows corn-after-soybeans with a projected $116 operator and land return per acre, soybean production with a projected $99 return, and corn-after-corn with a projected $75 return in 2006. Schnitkey co-authored the study with fellow Extension specialist Dale Lattz.

Agronomic research also indicates that corn-after-corn yields average about 10% lower than corn-after-soybean yields. "Many farmers, however, doubt that a yield drag exits," Schnitkey notes.

Schnitkey encourages farmers to project 2006 costs and returns for their operations.
"Given that the cost increases for corn have been higher for corn, corn yields are going to have to be higher in 2006 for corn returns to exceed soybean returns," he says.

However, soybeans also carry the risk of rust in 2006. "Many models of rust incidence suggest that outbreaks will not occur every year in
Illinois," points out Schnitkey. "The fact that an outbreak did not occur in 2005 does not provide a great deal of evidence concerning the probability of an outbreak."

When corn was king 

Since 1998, corn acres have increased in Illinois. That year, the ratio of corn-to-soybean acres was 1.00, meaning that there was one acre of corn for every acre of soybeans. That ratio was 1.03 in 2002, 1.07 in 2003, 1.17 in 2004, and 1.27 in 2005.

"Given constant total corn and soybean acres in
Illinois, a 1.27 ratio means that for every corn acre that followed soybeans, there was 0.27 acres of corn-after-corn," according to Schnitkey.

Two factors can explain the shift to more corn acres from 1998 to 2005. First, corn has been more profitable than soybeans. "Between 2000 and 2004, corn returns exceeded soybean returns in many areas of Illinois," says Schnitkey.

"The second factor likely causing a shift to more corn is an increase in the perceived risk of soybean production," he said. "Up to 2003, soybeans were often viewed as the 'safe' crop as yields did not exhibit as much variability as corn yields. In 2003, that perception began to change as soybean yields were considerably below trend-line yields on many farms. "Low 2003 soybean yields were followed in the next year by the discovery of soybean rust in the southern
United States…."

However, recent cost increases have narrowed the gap between corn and soybean returns. The complete study, "Projected Returns for Corn and Soybeans in 2006," is available at:
www.farmdoc.uiuc.edu/manage/newsletters/fefo05_22/fefo05_22.html.