February 19, 2020

Corn vs. Soybeans in 2016- farmdoc analysis

University of Illinois agricultural economist¬†Gary Schnitkey indicated yesterday at the farmdoc daily blog (“Corn versus Soybean Returns: 2016 Projections with Historical Comparisons“) that, “In the past three years, soybeans have been more profitable than corn in Illinois. There is a reasonable chance that soybeans will be more profitable than corn again in 2016. Larger increases in corn costs as compared to soybean costs make it more difficult for corn returns to exceed soybean returns, particularly at low corn and soybean prices.

“Figure 1 shows corn-minus-soybean returns for high-productivity farmland in central Illinois. These values are averages across grain farmers enrolled in Illinois Farm Business Farm Management (FBFM), Historical values reported in an Actual and Projected Returns and Costs publication available in the management section of farmdoc. Positive values indicate that corn was more profitable than soybeans and vice versa. From 2000 to 2012, corn was more profitable than soybeans in all years except 2002 and 2009. Corn returns exceeded soybean returns by very large margins in 2011 and 2012. From 2013 to 2015, soybean returns exceeded corn returns, an unusual three-year run compared to years between 2000 and 2012. In 2016, corn is projected to be more profitable than soybeans; however, the difference is small and soybeans could again be more profitable than corn.”

After more detailed analysis, Dr. Schnitkey explained that, “Similar to the last three years, soybean likely will be more profitable than corn unless a combination of one or more of the following four items occur:

1. Both corn and soybean prices increase to higher levels than currently expected. If relative price increases are the same for corn and soybeans, higher prices cause corn returns to increase relative to soybean returns.

2. Relative corn and soybean prices change, with the corn price increasing relative to soybean price

3. Corn yields are high relative to soybean yields.

4. The difference in corn costs decrease relative to soybean costs. Likely items that could contribute to this decrease are lower nitrogen fertilizer prices or lower corn seed costs.”

Keith Good