Lower Net Revenue Per Acre Expected in 2006

Informa Economics expects biggest decline in cotton followed by corn revenue. Jacqui Fatka

Published on: Jan 9, 2006

The 2006 crop year is shaping up to be one with higher costs and lower net revenue per acre across the board for the four major crops, according to Informa Economics Vice President Jim Sullivan.  

Variable cost of production ($/bu.) for 2005 vs. 2006 is up 14.2% for corn, 4.9% for soybeans, 14% for wheat and 7.9% for cotton.  For 2006 prices corn is estimated at $1.97, $5.81 for soybeans, $3.31 for wheat and cotton at $0.52, Sullivan says.

Sullivan shared the numbers as part of the Crop and Livestock Outlook at the 2005 American Farm Bureau Federation Annual Convention in Nashville, Tenn., this week.

Informa forecasts corn acreage down from 2005 at 80.1 million acres. Soybeans should see an increase in acreage estimated at 75.3 million acres. On the wheat side of the picture, winter wheat will increase while spring wheat acres are forecast down. Soft wheat experiences the biggest change with an additional one-million acre increase in the 2006 crop year.

"In corn with the total usage up and production down, we should have an adequate supply of corn through 2006," Sullivan says. This should also bring low prices for livestock feed, he adds. He estimates new crop prices right at the loan level of $1.90. For futures he expects the high side of $2.25.

Soybeans on the other hand will see lower production but higher acreage in 2006. The wild card still remains South American weather. Informa's current projection of South American soybean production sets at 105 million metric tons. The average soybean price estimate is $4.90 - below the $5 loan limit.  

On the wheat end, Sullivan says "if we have good yields in the European Union, we could see record world wheat production." Prices should remain above loan levels of $2.75, estimated at $3.00.

Carl Anderson, Texas A&M agriculture economist, expects the average farm price for 2006-2007 crop cotton to stay around the $0.535 range. For Dec. '06 futures prices he expects stable conditions at $0.52-$0.62 and possibly $0.45 to $0.65 range levels.