Corn-after-corn yields are down this year compared to corn-after-soybean yields. But corn prices are higher relative to soybean prices. University of Illinois economist Gary Schnitkey details the yields, costs and outcome of both production systems.
Initial reports suggest that yields on corn-after-corn (corn produced on land that was in corn the previous year) are significantly lower than corn-after-soybean yields. Lower corn-after-corn yields could cause soybeans to be more profitable than corn-after-corn. On high-productivity farmland, a 27 bu. lower yield for corn-after-corn than for corn-after-soybean could cause soybeans to be more profitable than corn-after-corn.
In arriving at 27 bu., the following prices, yields and costs are used:
165 bushel corn-after-soybean yield
50 bushel per acre soybean yield
$6.25 per bushel price for corn
$13.00 per bushel price for soybeans
$500 per acre non-land cost for corn
$290 per acre non-land cost for soybeans
These values appear to be reasonable estimates for 2011. Yields are lower than expected at the beginning of the year due to adverse weather in 2011. Also, the above costs do not include land costs, which are assumed to not vary whether corn or soybeans are grown.
Using the above values, the return before land costs for corn is $531/acre ($6.25 corn price x 165 yield - $500 non-land cost). The return before land costs for soybeans is $360/acre ($13.00 soybean price x 50-bushel yield - $290/acre non-land cost). Corn-after-soybeans has a $171/acre projected higher return than soybeans ($171 = $531 - $360).
If corn-after-corn has the same costs as corn-after-soybeans, the yield where corn-after-corn has the same return as soybeans is 138 bu. The 138-bushel yield causes corn to have a return of $360 per acre ($6.25 corn price x 138 yield - $500 non-land costs). The 138-bushel yield is 27 bu. below the 165 bu. for corn-after-soybeans.
The above analysis does not include crop insurance. If crop insurance payments occur at yields above the breakeven corn-after-corn yield, corn-after-corn will be more profitable than soybeans. If crop insurance payments occur at yields below the breakeven corn-after-corn yield, crop insurance will limit difference in returns between corn and soybeans. From a crop insurance perspective, the negative to corn-after-corn is that a lower 2011 yield will lower the APH in future years, thereby lowering the safety net provided by crop insurance.
From a historical perspective, corn prices are high relative to soybean prices. This causes increases in yield drags required to have corn-after-corn at the same return level as soybeans.