Economic Tidbits

Profitable Year for Crop Producers

Estimated Returns to Corn Soybeans

Current market conditions are foreshadowing a profitable year as Nebraska’s crop producers venture into fields this spring. The most recent USDA World Agricultural Supply and Demand Estimates (WASDE) report shows tightening conditions in both the corn and soybean markets. A corn carryover of 9.2 percent of usage is predicted and a soybean carryover of 2.6 percent, both at low levels not seen since 2013.

Strong exports, greater feed usage, and increased ethanol production have contributed to lower corn stocks. Larger exports have also driven soybean stocks lower too.

Higher prices mean farmers’ bottom lines could reach levels not seen since the early 2010s. Table 1 shows estimated returns for irrigated and dryland corn and soybeans. The costs per acre and yield information come from the UNL Department of Agricultural Economics Crop Budgets. The costs per acre are averaged across more than two dozen irrigated and dryland budgets with different assumptions for tillage practices, seed technologies, and fertilizer and chemical treatments. The costs reflect total economic costs including overhead, opportunity costs, and taxes. More information on the budgets can be found at: https://cropwatch.unl.edu/budgets. Mid-April bids by a central Nebraska elevator for new crop delivery—$4.84 per bushel for corn and $12.62 for soybeans—were used to calculate the estimated returns.

Table 1. Estimated Returns to Corn/Soybeans

Estimated Returns to Corn Soybeans

The estimated returns—$455 and $360 per acre for irrigated corn and soybeans respectively and $207 and $201 per acre for dryland corn and soybeans—are levels not seen for nearly a decade. As with all estimates, though, there are caveats. First, the UNL cost estimates do not include the recent price spikes in fertilizer, fuel, and chemicals. Second, UNL cost estimates are thought to reflect the top third of producers in terms of cost efficiency, so the estimates are not reflective of all producers.

Several factors could change the outlook for better or worse. Weather will have its say. Getting the crop planted, raised, and harvested will require cooperation by Mother Nature. China remains another critical factor. Chinese purchases of both corn and soybeans have driven the price spike in commodities (see story below). Any hiccup in the U.S. relationship with China or change in Chinese purchases could be disruptive. Still, the estimates bode for a profitable year. Producers might consider pricing some of this year’s production and some marketing advisors are suggesting producers look to pricing a bit of 2022 production. Locking in a profit on a portion of production is never a bad thing.

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