Switch from corn to soybeans? Not so fast!
With a wet spring and delayed planting, many farmers are thinking of switching from corn to soybean due to potential yield losses in corn as planting is delayed. Farmers should consider potential net revenue along with potential yield loss before making this decision.
Supply and demand drive this analysis. Much of the U.S. Corn Belt is suffering from poor planting conditions this year, so total corn production will likely decline. Markets will react by pushing corn prices up. If more farmers switch to soybeans, total soybean production may increase, pushing soybean prices down.
University of Minnesota Extension has studied last year's costs of production from the Center for Farm Financial Management's FINBIN database of Minnesota farmers' actual expenses, their three-year average yields, projected harvest prices and estimated government payments. Based on this data, we forecast estimated net revenue of $443 per acre for corn and $195 for soybean. These estimates indicate a tremendous advantage for corn over soybean and the need for a large decrease in corn yield before soybean is more profitable than corn. To view data tables for this information as well as data related to the examples below, read a more detailed version of this column at www.extension.umn.edu/go/1065.
Suppose a farmer was able to plant corn and soybean in a timely manner and did not suffer a yield loss. Suppose also that many farmers across the Corn Belt switched to soybean and markets pushed the corn price up by 5 percent and the soybean price down by 5 percent. The estimates show an increase in net revenue for corn to $496 per acre for this farmer and a decrease for soybean to $168 per acre.
In another scenario, a farmer had corn planting delayed and suffered a 10-percent yield loss for corn but no yield loss for soybean. Again, suppose many farmers switched to soybean so prices increased 5 percent for corn and decreased 5 percent for soybean. In this situation, corn still has higher net revenue ($385 per acre) than soybean ($168 per acre).
In one last scenario, suppose a farmer has to plant corn very late and suffers a 25-percent decrease in corn yield, but the soybean yield does not change and forecast prices do not change. In this situation, the estimated net revenue for corn ($181 per acre) drops slightly below the estimated net revenue for soybean ($195 per acre). This situation with no price changes is unlikely to happen this year since planting is being delayed across most of the Corn Belt and prices of both corn and soybean are being affected.
Farmers may be well served to keep their cropping plan unchanged for a little longer, even though corn yields may be lower. When planting occurs between May 25 and May 30, growers should consider hybrids that are five to seven days earlier in relative maturity when compared to full-season hybrids. When planting is delayed until June 1 to June 10, consider hybrids that are eight to 15 days earlier. The latest recommended planting dates for corn grain are around June 5 in central and northern Minnesota, and June 15 in southern Minnesota.
Farmers, lenders and others can estimate net revenue to analyze their own situations under different price and yield conditions. A management tool (in Microsoft Excel) developed by Extension economist Bill Lazarus is available at http://z.umn.edu/3lk.