Economic Tidbits

Considerations for Corn/Soybean Planting

While most planting decisions have likely been made, relative changes between the prices of soybeans and corn over the past month have led some farmers to rethink their planting intentions. The USDA NASS projected Nebraska farmers would plant 10.5 million acres of corn and 5.1 million acres of soybeans.

The soybean to corn price ratio has widened in Nebraska since the first of the year. At the beginning of the year, soybean prices were 2.35 times corn prices in central Nebraska. As of April 14, the ratio had widened to 2.53 times. Given the recent price changes, there is an expectation there will be a marginal shift in acres from corn to soybeans. There are several factors farmers should consider if thinking about shifting acres:

  • Using the mid-point, per bushel, cost estimates from the UNL 2020 Crop Budgets for irrigated and dryland corn and soybeans (see next page); 2018 average yields; and central Nebraska, April 14, bids for October delivery suggests irrigated soybeans would return slightly better than irrigated corn, $-23/acre compared to $-30/acre, and dryland soybeans would return much better than dryland corn, $-50/acre compared to -$129/per acre.
  • The above estimates use statewide average costs and yields. Farmers should use their own yields and projected costs when examining alternatives.
  • Farmers should research and develop their own price expectations for the 2020 crop. The Food and Agricultural Policy Research Institute (FAPRI) latest price forecasts suggest new crop prices of $3.35/bushel for corn and $8.27/bushel for soybeans, higher than the current bids at central Nebraska elevators used for the estimates above. The University of Illinois used prices of $3.30/bushel for corn and $8.30/bushel in its calculations relative to the per acre returns for corn and soybeans in Illinois.
  • Many factors will influence crop prices going forward: export markets including Chinese purchases under the Phase 1 agreement; feed usage expectations with the lack of distillers’ grains; the extent other farmers shift planting intentions; the length and depth of the current COVID economic slowdown; among other factors. A recent Market Intel by AFBF which analyzed the future corn markets may be of interest: https://www.fb.org/market-intel/corn-acres-should-be-reconsidered-in-2020
  • To determine how sensitive returns per acre are to price and yield changes, various high/low, price/yield scenarios should be examined. Such scenarios can offer hints as to how per acre returns will vary with price/yield combinations. Farmers should measure these scenarios against their expectations and the risks of variance from their expectations.
  • Changes in the acres planted will not affect farm program payments. Payments made under ARC and PLC are distributed on base acres not planted acres.
  • Inputs already applied to acres will determine any flexibility farmers might have to change their planting intentions. Consideration should also be given to the value any residual nitrogen next year from planting soybeans this year.

Table 1. Estimated 2020 Costs per Bushel

  Dryland Irrigated
 Corn    
 Cash   $1.96-$3.36  $2.02-$2.54

 Total

 $3.01-$4.74 $2.84-$3.59
Soybeans    
Cash $5.38-$5.59 $4.45-$5.59
Total $7.73-$8.32 $7.18-$9.01

Source: University of Nebraska-Lincoln, Dept of Agricultural Economics

https://agecon.unl.edu/cornhusker-economics/2020/nebraska-crop-budgets-review

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