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Exceptional Corn and Soybean Yields in 2017

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Many areas of the country had above trend yields in 2017. While still not the majority, county yields of over 200 bushels per acre are becoming common and may be expected in the center of the corn-belt. Similarly, counties with over 60 bushels per acre are occurring with some regularity. Todd Gleason talks with University of Illinois Agricultural Economist Gary Schnitkey.

USDA NASS Soybean Objective Yield Pod Weight

Tuesday’s USDA Crop Production report included a very heavy soybean pod weight. Todd Gleason talks with USDA NASS Chief of the Crops Branch about the weight, how it is calculated, and how it might change over time.







State by State & Regional Corn Yields

This map shows the August 2017 USDA Crop Production Report state by state corn yields. Rollover each state to reveal the yield. Darker green colors represent higher yields. The table gives more complete detail and breaks down the nation by region. Note the twelve corn belt states in the Midwest are expected to yield 8.4 bushels to the acre less this year than last. The southern states, while representing only about 1.5 billion bushels of the total expected 2017 production of 14.2 billion show a year over year increase of nearly 14 bushels to the acre.

Todd Hubbs Review August Crop Reports

Excerpt from August USDA Crop Production report.

Corn production is forecast at 14.2 billion bushels, down 7 percent from last year. Based on conditions as of August 1, yields are expected to average 169.5 bushels per acre, down 5.1 bushels from 2016. If realized, this will be the third highest yield and production on record for the United States. Area harvested for grain is forecast at 83.5 million acres, unchanged from the June forecast but down 4 percent from 2016.

Soybean production is forecast at 4.38 billion bushels, up 2 percent from last year. Based on August 1 conditions, yields are expected to average 49.4 bushels per acre, down 2.7 bushels from last year. Area for harvest in the United States is forecast at a record high 88.7 million acres, unchanged from the June forecast but up 7 percent from 2016. Planted area for the Nation is estimated at a record high 89.5 million acres, also unchanged from June.

All wheat production, at 1.74 billion bushels, is down 1 percent from the July forecast and down 25 percent from 2016. Based on August 1 conditions, the United States yield is forecast at 45.6 bushels per acre, down 0.6 bushel from last month and down 7 bushels from last year.







...see USDA Reports page for more complete detail.

Another Rough Income Year for Grain Farmers



It looks like 2017 will be another rough year for grain farmers in the United States. Even in Illinois, where the trend line yield for corn is 200 bushels to the acre and 61 for soybeans, the average income on a 1500 acre grain for this year is just $25,000. That’s not good says University of Illinois Agricultural Economist Gary Schnitkey, “That $25,000 isn’t enough to cover all the family living withdrawals and capital purchase expenses needed for a family farm of this size. Seventy to eighty-thousand dollars is needed to be sustainable in the long run. So, we are looking, again, at some financial deterioration if these projections hold”.
That $25,000 isn’t enough to cover all the family living withdrawals and capital purchase expenses needed for a family farm of this size. Seventy to eighty-thousand dollars is needed to be sustainable in the long run.
It is a projection that wasn’t quite so low earlier in the year. Then, like today, Schnitkey was using an average cash sales price of $3.70 a bushel in the Illinois crop budget for corn. What has caused the University of Illinois forecast to come down is the decline in soybean prices. Earlier in the year it was $9.70 for price, but now it has come down and Schnitkey is using $9.00 in the 2017 soybean crop budget. Even this is above the current fall delivery price at about $8.85 in central Illinois.


University of Illinois 2017 Projected Crop Budgets

A decline in soybean prices to $9.00 likely will trigger 2017 ARC-CO payments, given county soybean yields are at trend levels. As a result, U of I’s 2017 projections build in a $15 per acre government payment. It won’t arrive until the fall of 2018, but an estimated $20 payment from last year’s crop should arrive this fall.

In 2017, revenue is projected to be $755 per acre for corn, down by $77 per acre from last year. Gross revenue for soybeans is projected at $564 per acre, $140 per acre lower than in 2016.

Historical Planted Acre Changes for Corn and Soybeans | an interview with Gray Schnitkey



Friday, March 31, 2017, USDA will release the Prospective Plantings report. The survey of U.S. farmers will estimate how many acres of corn and soybeans will be sown this spring. University of Illinois Agricultural Economist Gary Schnitkey talks with Todd Gleason about the historical changes in planted acres.



by Gary Schnitkey
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At its annual Agricultural Outlook Conference in February, USDA projected that planted acres of corn would decrease from 94.0 million acres in 2016 to 90.0 million in 2017, a decrease of 4 million planted acres. At the same time, soybean acres are projected to increase from 83.4 million acres in 2016 to 88.0 million in 2017, an increase of by 4.6 million acres. Herein, we evaluate historical changes in acres across counties, thereby providing perspective on where likely 2017 acreage changes may occur.

U.S. Planted Acres

In 2016, planted acres to corn in the United States was 94.0 million acres (see Figure 1). This acreage level was the third highest number of planted acres since 2000, only being exceeded by 2012 (97.3 million acres) and 2013 (95.4 million acres). The 2017 projection of 90 million acres would be a 4.0 million acre decrease from the 2016 level. Plantings of 90.0 million acres would be about the same level as occurred in 2014 (90.5 million acres) and would be below the average planting for the last ten years.



In 2016, planted acres to soybeans was 83.4 million acres, the highest amount ever planted in the United States. Before 2014, planted acres to soybeans never exceeded 80 million acres (see Figure 1). Planted acres exceeded 80 million acres in each year since 2014: 83.2 million acres in 2014, 82.6 million in 2015, and 83.4 million in 2016.

In the following maps, acreage changes from 2011 to 2016 will be shown. In 2011, U.S. corn acres were 91.9 million, 1.9 million acres higher than in 2016. Reversing the corn acre increases during this five year period would go part way to reaching the decreases projected for 2017. The soybean acreage increase from 2011 to 2016 of 8.4 million represents twice the change projected from 2016 to 2017.
Corn Acre Changes

Figure 2 shows a map color coded to give changes in acres from 2011 to 2016. Counties colored blue had increases in acres, counties coded in orange had decreases in acres. Those counties that are yellow had essentially the same acres in 2016 as they did in 2011.



Several areas had pronounced increases. In particular, the northern Great Plains had sizeable increases. Between 2011 and 2016, North Dakota increased acres by 1.2 million, South Dakota by .4 million, and Minnesota by .4 million. Another area of sizable increase was Texas, with the planting .9 million more acres in 2016 than in 2011. Counties along the Mississippi River, especially in Arkansas, increased acres as well.

There were areas of notable decreases as well. Sizable decreases in corn acres occurred in Illinois. Between 2011 and 2016, planted acres in decreased by 1.0 million in Illinois. Indiana and Iowa had modest decreases as well.

Soybean Acre Changes

Figure 3 shows a map with planted acre changes for soybeans. Similar to corn, soybean acres increased in the upper Great Plans. Planted acres increased by 2.0 million acres in North Dakota, 1.1 million acres in South Dakota, and .5 million acres in Minnesota.



Other areas of significant increase were Illinois with a 1.1 million acres increase in planted soybeans. Planted acres also increased along the Mississippi River, parts of Kentucky and Tennessee, as well as areas in North and South Carolina.

Perspective on Changes for 2017

Areas with large acreage changes in the past likely will contribute in a significant way to acre changes from 2016 to 2017. These areas include the upper Great Plans, Texas, and the corn belt.

It seems conceivable that total corn and soybean acres could continue to increase in the upper Great Plains in 2017. Much of the acreage increases of corn and soybeans between 2011 and 2016 came from acres previously planted to wheat. In 2017, wheat acres could continue to decrease, leading to increases in corn and soybean acres. Whether corn acres will decrease while soybean acres increase in this region is an open question. One event that could lead to acre decreases is higher incidence of prevented planting. Prevented plantings were low in 2016, leaving open the possibility of increases in prevented planting acres in 2017.

Texas could see acreage shifts away from corn. Cotton prices look favorable, and an increase in cotton acres could contribute to fewer acres in corn.

Illinois and the corn belt in general could see shifts from corn to soybeans. Returns from crop budget suggest soybeans will be more profitable than corn (farmdoc daily, December 6, 2016), suggesting a shift is possible.

While budgets suggest the possibility, acre shifts have been slow in coming. Perhaps the most likely area where a shift will occur is where corn acres exceed soybean acres by a considerable margin. Corn acres divided by soybean acres exceed 1.0 in many counties in southern Minnesota, Iowa, northern and central Illinois, and western Indiana (see Figure 4). Bringing these areas back closer to a 50% corn - 5% soybean rotation, indicated by 1.0 corn divided soybean value, could increase profits suggesting that switches are possible.



Summary

Areas that experienced large acre changes in the past likely will be the ones where acres changes occur in 2017. This suggests focus on the upper Great Plains, Texas, and Illinois and the corn belt more generally. Continued corn and soybean acreage increases in the upper Great Plains seem reasonable to expect, except if prevented planting acres increase significantly. Texas could experience reduced corn acres. Budgets suggest switches to more soybeans from corn in the Midwest, although this is the case in previous years. Further indications of planting attentions will be received with the release of NASS’s Prospective Plantings report on March 31.

Anticipating the March 1 Soybean Stocks Estimate

USDA, at the end of this month, will let us know how much of the nation’s soybean crop there is left in the bin. It “should” be a fairly uneventful number.

by Todd Hubbs
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On March 31, the USDA will release the quarterly Grain Stocks report, with estimates of crop inventories as of March 1, and the annual Prospective Plantings report. For soybeans, the stocks estimate is typically overshadowed by the estimate of planting intentions. Usually, the quarterly stocks estimates for corn garners more interest because these reports reveal the pace of feed and residual use which is a large component of total corn consumption. The March 1 soybean stocks estimate this year may not provide much new information despite recent growth in marketing year ending stocks and concerns about the size of the South American crop… continue reading the full article by clicking here.

Generally, Todd Hubbs says it is pretty easy to figure out how many soybeans have been consumed. There is a regular reporting system for how many bushels are exported and one for how many are crushed. That second report, the crush, calculates how many soybeans are crushed in the United States into its two components. These are soybean meal and soybean oil. Hubbs, an agricultural economist at the University of Illinois, says the reports make it easy enough to calculate disappearance, consumption, usage, whatever you want to call, and consequently come up with a number that approximates how many bushels are left to use. Hubbs’ March 1 grain stocks figure for soybeans is 1.68 billion bushels. Here’s the math he used to get there.

Quote Summary - Exports for the first quarter were 932 million bushels. For the second quarter, I have them pegged at about 721 million bushels. I have the second quarter crush at 491 million bushels. This brings the total crush for the first half of the marketing year to 976 million bushels. We’ve been crushing a really good rate, but we have a lot of soybeans. So, with USDA raising ending stocks to 435 million, if that number holds and we don’t drive those numbers down, and if the March 1 stocks number is 1.68 billion, it means the last half of the marketing year we are going to have to consume about 1.23 billion bushels.

Hubbs thinks that is a reasonable number. It depends, though, he says mostly on what happens in the export market through August.


2017 Projected Incomes on Illinois Grain Farms



Net incomes for Illinois grain farms are projected to be lower this year than last. If this University of Illinois estimate holds, writes agricultural economist Gary Schnitkey on the farmdocdaily website, the weakening financial position of farms in the state will worsen. The last half decade has really changed the financial picture for farmers says Schnitkey, “So we had high incomes from 2010 to 2012 and every year since 2012 we’ve been on a downward trend through 2015. This is when we hit a $500 per farm average net income on Illinois grain farms enrolled in FBFM. This is very low and the lowest through the entire period we’ve examined. Obviously this is not enough to maintain the financial position of farms.”

Schnitkey evaluated FBFM net income records going back to 1996. FBFM stands for Farm Business Farm Management and is a record keeping service for farmers. The service has not yet summarized net incomes for 2016. However it is projecting a substantial rebound.



It appears net income for grain farms in the service will average somewhere between forty and fifty-thousand dollars. There are three primary reasons for this says Schnitkey, “What lead to it was higher than trend line yields. USDA estimates the statewide corn yield at 197 bushels per acre. Just three bushels off the record yield set in 2014 of 200 bushels. Soybean yields averaged 59 bushels. It is a record setting yield. Both of those record setting yields lead to higher incomes in 2016 along with very good ARC County payments.”

Those are two of the three factors leading to a better 2016. The high yields and sizable ARC County payments - that’s the farm safety net from Washington D.C. - aren’t likely to be repeated this season. The third factor very well could be repeated. It is lower input costs including cash rents and fertilizer. It won’t be enough thinks Schnitkey.
Quote Summary - For 2017 we used trend yields and commodity prices of $3.80 for corn and $9.90 for soybeans that resulted in lower incomes for the year. Probably something in the $20,000 range per farm.
Schnitkey cautions it is very early in the season, and that at this same time last year 2016 was projected to be a very, very bad year. It rebounded. It is also important to note that while higher than 2015 incomes, the projected 2016 incomes do not result in the building of financial reserves on most Illinois farms. Schnitkey believes most farms will continue to see the erosion of working capital, potentially leading to the need to refinance outstanding operating loan balances.

2017 Soybean Prospects

farmdocdaily article

Farmers around the nation are expected to plant more soybeans than usual this spring. There are many reasons this might be the case, but only one price outcome if things on the planet remain the same.

Prospects for 2017 Ethanol Usage

Ethanol production in the United States ended the year on a record-setting note. It could mean an even bigger number for the corn-based fuel in 2017.

The U.S. ethanol industry ended 2016 on a high note. Ethanol production for the week ending Dec. 30 set a new ethanol production record with an average of 1.043 million barrels per day. The March futures price for corn moved higher last week to close at $3.58 in large part due to strength in the ethanol sector. Ethanol production and exports returned strong numbers over the first quarter of the marketing year. Currently, the World Agricultural Supply and Demand Estimates report forecast for corn consumption for ethanol production is 5.3 billion bushels. According to University of Illinois agricultural economist Todd Hubbs, when taking into account an increase in projected gasoline consumption in 2017 and robust ethanol export levels, the ability to surpass this projection is a strong possibility.

“Domestic ethanol consumption in 2017 will be influenced by domestic gasoline consumption, due to the ethanol blending requirement and the biofuels volume requirement associated with the Renewable Fuels Standard,” Hubbs says. “The EPA final rulemaking for the Renewable Fuels Standard for 2017 was released on Nov. 23 and is discussed in greater detail in the farmdoc daily article posted Nov. 30. In brief, the renewable fuels volume requirement is set at 19.28 billion gallons for 2017, which is up from the 18.11 billion gallons required in 2016.

“The conventional ethanol requirement is set at 15 billion gallons for 2017, 500 million gallons larger than 2016 and equal to the statutory requirement level,” Hubbs says. “If the gasoline consumption forecast used by the EPA is correct, the E10 blend wall will be 14.36 billion gallons in 2017. The EPA believes an ethanol supply of 14.56 billion gallons is reasonably attainable in 2017. Within the 14.56 billion gallons, E15 and E85 blends are expected to be 107 and 204 million gallons respectively. The ability to attain the E15 and E85 blend levels remains to be seen, but the increase in ethanol requirements provides support for greater corn usage in 2017.”

U.S. retail gasoline prices averaged $2.14 per gallon in 2016, which is 12 percent less than the price experienced in 2015 and is the lowest price since 2004. The December Energy Information Agency Short Term Energy Outlook projected an increase in gasoline prices for 2017 to $2.30 per gallon. Despite the projection of higher gasoline prices, gasoline consumption is forecast at 143.60 billion gallons in 2017, which is up from the 142.72 billion gallons consumed in 2016. Ethanol production is forecast to be 1 million barrels per day.

“If the EIA projection is correct, approximately 15.3 billion gallons of ethanol will be produced in 2017,” Hubbs says. “When considering the robust ethanol export trade currently in process, the U.S. ethanol industry is expected to produce a record level of ethanol in 2017.”

Ethanol export numbers are available from U.S. Census trade data for 2016 through November. U.S. exports of ethanol thus far are at 948 million gallons, which is up almost 27 percent from the similar period in 2015.

According to Hubbs, for 2016, the prospect of ethanol exports exceeding 1 billion gallons is not unreasonable.

Canada, China, and Brazil imported approximately 67 percent of the ethanol shipped from the U.S. through November. “The increase in ethanol exports is driven largely by increased volumes sent to China and Brazil,” Hubbs says. “China imported 179 million gallons through November, which far exceeds the 73.8 million gallons imported during the entirety of 2015. Brazil imported 224 million gallons through November, which is almost double from 2015. As we progress into 2017, the increases are expected to persist in Brazil because high sugar prices are expected to decrease ethanol production as mills allocate cane for sugar production in 2017. There is concern that China could raise ethanol tariffs and reduce ethanol imports in 2017 due to a possible trade dispute with the new administration.”

Hubbs says the implications for corn consumption during the 2016–17 marketing year can be seen in the USDA Grain Crushing and Co-Product Production report released on Jan. 3. Grain crushing for fuel alcohol is available through November. For the first three months of the marketing year, 1.34 billion bushels of corn has been processed for ethanol. This is up 3.2 percent from 2015 processing numbers.

“If corn used for ethanol production maintains this pace, 5.37 billion bushels will be processed in the marketing year,” Hubbs says. “Using EIA weekly ethanol production numbers, December ethanol production averaged over 1 million barrels per day. These production levels place corn use for ethanol production in a range of 455 to 460 million bushels for the month if corn use maintains the pace of the three previous months. With a conservative estimate of corn crush in December, total corn consumption for ethanol production through the first third of the marketing year would be above the current WASDE projection.

“Lower corn prices, strong ethanol exports, and greater blending requirements combine to make 2017 appear to be a strong year for corn consumption in ethanol production,” Hubbs concludes. “If the U.S. ethanol industry produced over 1 million barrels per day for the entire year, the ability to blend at requirement levels under an expanded gasoline consumption scenario and meet potential export market demand bodes well for corn use in the sector for 2017.”

Brazil Soybean Update | an interview with Kory Melby

The soybean crop in Brazil looks to be mostly in good condition, however, as you’ll hear in this interview by Todd Gleason some areas are under performing.


Kory Melby, Brazilian Ag Consulting Service - Goiania, Brazil

Assessing the Potential for Higher Corn Prices

The odds are against four dollar cash corn this year and next, at least for any extended period of time.

The monthly average cash price paid to farmers in the United States for their corn has been less than $4.00 a bushel for 27 consecutive months. It’s likely to stay that way well into 2017, too, says University of Illinois Agricultural Economist Darrel Good unless something changes, “Some combination of a reduction in corn supplies and increased consumption will be required in order for prices to move above $4.00 per bushel for an extended time.”

On the supply side, or how much corn is around, USDA’s next Crop Production report is due November 9th. It will contain a new forecast of the size of the 2016 U.S. corn crop. Previous history of yield forecast changes in November in years when the forecast declined in September and again in October as was the case this year, says Darrel Good, show very mixed results with 5 moving lower, 1 unchanged, and 4 of the ten getting bigger. The trade is leaning toward a smaller corn yield this time around. So, not a lot of supply side help expected from the USDA reports on this fall’s crop. That make the southern hemisphere pivotal.

Brazilian production declined from 3.35 billion bushels in 2015 to 2.64 billion bushels in 2016 due to late season drought. Early season USDA projections are for production in 2017 to rebound to 3.29 billion bushels. In addition, Argentina is expected to expand corn area due to reductions in export taxes.

It is too early in the South American growing season to assess yield potential, but production well below early projections would be required to push corn prices higher says Good in his Weekly Outlook on the Farm Doc Daily website. He also thinks a more likely source of a reduction in corn supply may be reduced corn acreage in the United States next year.

Darrel Good - Assuming a three million acre reduction in harvested acreage and consumption during the 2017–18 marketing year near the 14.525 billion bushels projected for this year, the 2017 average yield would need to be below 173 bushels in order for year-ending stocks to be reduced from the 2.32 billion bushels projected for the current year. Under the acreage and consumption assumptions made here, a yield near trend value of 169 bushels would result in year-ending stocks of about 1.99 billion bushels.

There are lot of supply side ifs in that statement. Maybe then demand for corn could be the key to higher prices. The good news here is that U.S. corn exports are up, but that’s based upon last year’s poor corn crop out of Brazil. It doesn’t appear feed usage will increase either, thinks Good, and while the ethanol grind has be increasing, USDA has already penciled in an extra 100 million bushels of usage.

It appears unlikely thinks Darrel Good that higher corn prices will be generated by a large reduction in the estimated size of the 2016 U.S. crop or stronger than projected demand for that corn. That leaves a smaller than expected South American crop or a much smaller U.S. crop in 2017 as the potential sources of higher prices. If South American production increases as projected, a large decline in U.S. acreage and/or a 2017 yield below trend value may be required to push the average corn price above $4.00 during the 2017–18 marketing year.

Too Early to Sell the 2017 Soybean Crop

There’s a nagging question farmers are wondering about as they harvest what is quite likely to be their best soybean crop ever. Is it so good, so plentiful, that it might be time to consider selling some of next year’s crop.

Let’s start with some plain facts. The price of soybeans from April through August was higher, on average, than it was in the prior seven months. This says Darrel Good is because the trade expected there to be a whole lot of soybeans leftover from last years harvest by the time right now arrived. Something like 450 million bushels. That didn’t happen. The South American crop failed and U.S. exports jumped by 250 million bushels. Like most of the previous years, all but one since 2008, this left fewer than 200 bushels in the bin from the previous season’s soybean crop. Here’s how Good, a University of Illinois Agricultural Economist, says that should all play out in the coming months.

With consumption during the 2016–17 marketing already projected to be record large, an increase in the average yield forecast (without an unexpected decline in the estimate of harvested acreage) would likely result in an increase in the current projection of year-ending stocks of 365 million bushels. Two additional factors point to the potential for additional weakness in soybean prices during the 2016–17 marketing year. -Darrel Good

First, and you can read this on the Farm Doc Daily website, USDA expects a modest increase in soybean acreage for harvest in South America next year. While an increase of only 1.5 percent is currently projected (mostly in Brazil), normal yield levels result in a projected 3.5 percent (220 million bushels) year-over-year increase in soybeans from the southern hemisphere. If that large crop materializes, the pace of U.S. exports would be expected to experience the normal sharp seasonal decline beginning in the spring of 2017. A second factor that could contribute to lower soybean prices, says Darrel Good, is an increase in soybean acreage in the U.S. next year.

While it is too early to form solid expectations about U.S. acreage, low prices of other commodities relative to soybeans would be expected to result in some switch away from those crops to soybeans. In particular, the large increase in corn acreage in 2016, prospects for relatively large year-ending corn inventories, and the relatively high cost of producing corn would be expected to result in fewer corn acres in 2017. Futures prices for the 2017 corn and wheat crops are higher than prices for the 2016 crop, but those prices are still low relative to prices for the 2017 soybean crop. The USDA’s Winter Wheat Seedings report released in the second week of January 2017 will provide the first indication of acreage response to current price levels. The size of the 2017 soybean crop will still largely hinge on the average yield. It will be interesting to observe if three consecutive years of above trend U.S. average soybean yields will alter early expectations for the average yield in 2017.

Here’s what Darrel Good thinks this all means at the moment. With so much production uncertainty over the next 10 months, a strong pace of Chinese buying, and the recent history of smaller than expected year-ending stocks, it is not completely surprising that the market is not yet reflecting the potential for a growing surplus of soybeans during the 2017–18 marketing year. The question for producers, he says, is whether or not current prices offer a pricing opportunity for a portion of the 2017 crop.

The answer is more likely to be yes for those who intend to increase soybean acreage in response to the current corn, wheat, and soybean price relationships.

Grain Farm Income & Cash Rent Outlook

by Todd E. Gleason



Urbana, Illinois - Wednesday morning September 7, 2016 University of Illinois Extension Agricultural Economist Gary Schnitkey presented a webinar looking forward into 2017. The discussion centered on farm profitability, projected income, and cash rents. You may the watch the webinar. What follows is a summary of the hour long content.





The USDA WASDE monthly average corn price is $4.67 from 2006 to 2016. The price of corn has been below this average since the fall of 2013 & Gary Schnitkey believes it is likely to continue to stay below this average through the 2017/18 crop year.

Each year USDA tracks the average marketing year cash price. This price is updated monthly in the World Agricultural Supply and Demand Estimates report. The average cash price for corn from 1975 to 2005 is $2.33, $5.95 for soybeans. This is a long term national average cash price. The USDA projected estimates for this marketing year (2016/17) are currently $3.15 and $9.10. The USDA estimate for the 2015 crops is $3.60 and $9.05. This last set can be used to compute expected ARC County payments to be delivered this fall.







Here is a [link](http://farmdoc.illinois.edu/fasttools/index.asp) to the FarmDoc Fast Tools web page from which you may download an Excel spreadsheet to project ARC & PLC payments.

The following tables detail gross revenue per acre for highly productive central Illinois farmland. These are actual, as derived from the Illinois Farm Business Farm Management records, and projected revenues.







op

Operator and land returns have been declining for both corn and soybeans for several years. However, returns from soybeans have been out performing corn since 2013. Schnitkey predicts this will continue through 2017. It would be the fifth year of higher returns for soybeans than corn. Raising corn on cash rented farmland has been a loser since 2014.

Total income on all Illinois corn and soybean farm (all types of owned & cash rented combined) for 2016 projects a breakeven income year.




Schnitkey says farmers will face three key decision making factors as they consider cash renting farmland for 2017, and that it might be better to give up some of the land based on these considerations.




Across the board the University of Illinois agricultural economist says farmers might need to rethink crop rotations. Soybeans have proved better for several years, and it may be time to adjust to this reality. This or it needs to get cheaper to plant corn. Back in 2000 it costs $63 less to sow and harvest an acre of soybeans. This year the difference was more than $200 an acre of non-land costs in favor of soybeans over corn.



Last week the professional farm managers in Illinois suggested they'd be lowering cash rents by about $20 next year (ISPFMRA Survey). Gary Schnitkey's number is a more conservative $17 an acre based on the fact not all land is professionally managed. Neither of these would be enough to make a cash rented farm break even given $3.50 corn and $9.00 soybeans (2017 | by expected corn yield across Illinois).



So what's the impact on the price of farmland? Well, says Schnitkey, if interest rates stay low the price of farmland will drop by approximately the same percentage change as the cash rent drops. Because cash rent changes very slowly, this is good news for farmland owners, bankers, and producer owners.





Each Tuesday Gary Schnitkey posts a new article to the FarmDocDaily website. Periodically he and the other agricultural economist at the University of Illinois hosts webinars. You may register for upcoming webinars and watch those that have already concluded on this page.