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Will Soybeans Have Higher Returns than Corn in 2016?
“There is a reasonable chance that soybeans will be more profitable than corn in 2016,” says Gary Schnitkey, economist at University of Illinois. “Larger increases in corn costs as compared to soybean costs make it more difficult for corn returns to exceed soybean returns, particularly at low corn and soybean prices.”
Increasing corn costs
In 2000, it took $66 more per acre to grow corn than it did soybeans. Direct costs, including fertilizer, pesticides, seed, drying, storage, and crop insurance, accounted for 81% of that difference. By 2013, the cost difference rose to $231 per acre, 94% attributed to direct costs.
That number has come down slightly to a $201-per-acre difference projected for 2016, according to the University of Illinois.
Corn vs. soybean profit
Corn always has higher revenue than soybeans, but the revenue isn’t always large enough to compensate for higher costs. Between 2000 and 2006, the average revenue difference between corn and soybeans was $119 per acre. That moved up to $247 per acre from 2007 to 2015.
With rising commodity prices, corn was more profitable than soybeans from 2000 to 2012 in central Illinois, with the exception of 2002 and 2009. From 2013 to 2015, soybeans had higher returns than corn, as prices dropped and costs came down only moderately from the 2013 high.
What about 2016? With 200-bushel corn yields and 61 bushel-per-acre soybeans and prices at an estimated $3.80 for corn and $8.87 for soybeans, the estimated difference in corn and soybean revenue is $219 per acre. Remember the cost difference for this year is projected to be $201, which would give corn an $18-per-acre advantage.
However, the difference is so small that Schnitkey believes soybean returns are more likely to exceed corn returns.
What increases the odds for corn? A combination of one or more of the following:
- Both corn and soybean prices increase at a comparative pace.
- Corn prices rise more than soybean prices.
- Corn yields are high relative to soybean yields.
- Corn costs, particularly nitrogen or seed, decrease compared with soybean costs.
For example, take a look at what rising commodity prices do to the revenue margin. With 200-bushel corn yields and 61 bushel-per-acre soybeans and prices at $4.50 for corn and $10.50 for soybeans, the crop revenue difference between corn and soybeans rises to $259 per acre, compared to $219 with 2016 prices.