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Corn, soybean production costs poised to jump in 2008

Agriculture.com Staff 12/17/2007 @ 1:41pm

Corn production will be more profitable than soybean production in northern and central Illinois, but soybeans take the edge in southern Illinois, according to a new report prepared by Gary Schnitkey, University of Illinois Extension farm financial management specialist.

"Significantly higher costs for corn production may cause some farmers to switch acres from corn to soybeans," Schnitkey says in a university report. "The purpose of the study was to project returns for 2008. Corn returns minus soybean return, hereafter referred to as corn-minus-soybean-returns, indicate that corn production may have higher returns than soybean production on high productivity farmland in 2008."

Schnitkey cautions that changes in commodity prices could change relative profitability. Returns will also vary across farms. The projected 2008 corn-minus-soybean-returns are roughly similar to averages observed from 2004 to 2007.

Corn-minus-soybean-returns were calculated for northern, central, and southern Illinois. Central Illinois was further divided into high-productivity farmland and low-productivity farmland. Between 2004 and 2007, corn yields averaged 183 bushels for the central Illinois farms with high productivity and 166 bushels for the low productivity category farms.

Data for the study was taken from farms enrolled in the Illinois Farm Business Farm Management (FBFM) program. To be included in the study, a farm had to receive a majority of its income from grain operations.

"Returns for 2007 are not final and are based on yield, price, and cost estimates," Schnitkey notes. "The 2007 results will become 'final' when FBFM records are summarized in 2008."

During the period studies, corn-minus-soybean-returns were lowest in 2005. That year, corn yields were below average while soybean yields were near average. Corn-minus-soybean-returns were highest in 2006. Both corn and soybean yields were above average in 2006 and prices increased substantially over historically average levels. In percentage terms, corn price increased more than soybean price in 2006.

Corn production will be more profitable than soybean production in northern and central Illinois, but soybeans take the edge in southern Illinois, according to a new report prepared by Gary Schnitkey, University of Illinois Extension farm financial management specialist.

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