Melvin Brees
Farm Management Specialist
University of Missouri Extension




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March 30, 2001

Less Corn, More Beans

USDA's Planting Intentions Report, issued today (3-30-01), shows corn acres down 4% (76.693 mil. acres) and a record 76.657 million acres of soybeans. The possibility of spring planting delays could cause an even larger acreage shift from corn to soybeans. The anticipated record soybean plantings on top of the four largest production years ever, suggests soybean prices won't get much better anytime soon. Should we rethink the situation and plant more corn?

At current price levels, neither crop offers economic profits! Using University of Missouri 2001 projected crop budgets (prepared by Raymond E. Massey, Crops Economist), operating costs including labor are $209.48 per acre for corn and $126.00 for soybeans. Ownership costs (machinery depreciation and interest, real estate taxes, interest, etc. or cash rent) amount to $127 and $111 per acre for corn and soybeans. Total per acre costs would be $336.48 for corn and soybean at $237.00. Per acre yields of 130-bushel corn and 40-bushel soybeans, result in break-even prices near $2.60 corn and $5.95 soybeans. Thursday's (3-29-01) Central MO new crop cash bids were generally just above $2.00 for corn and $4.00 for soybeans--well below break-even prices. While current new crop corn prices are above current CCC market loan prices, soybean prices suggest that the loan or LDP will again be used in soybean marketing strategies.

If economic profits aren't possible, final planting decisions need to focus on which crop minimizes loss or maximizes cash flow returns. This answer, of course, depends upon each individual farm and its cash cost structure. In the past, a general rule-of-thumb was that a soybean/corn price ratio of 2.4/1 or 2.5/1 was the break-even price ratio. When the soybean/corn price ratio was greater than 2.5/1, the ratio favored soybean planting. A ratio of less than 2.4/1, favored corn. The above budget example seems to suggest that this break-even ratio may be closer to 2.3/1 ($5.95/$2.60). Calculate this ratio using your own costs and yields, it could be much different.

How high do corn prices need to be for you to plant more corn? The CCC loan also affects how you calculate the ratio and what corn prices it will take to compete with the soybean loan price. Assuming the market loan determines the net soybean price near $5.25 (depending on county loan rate), cash corn needs to be about $2.28 to achieve a 2.3/1 price ratio. Using the current new crop basis (about minus thirty cents) reflected in Thursday's new crop bids, this translates to about $2.58 December corn futures price. Watch closely to see if the market decides to "bid for more corn acres." At mid-morning today (Friday), December corn was up over six cents--near $2.40. If corn prices continue to rally, you might want to reconsider your soybean/corn acreage mix. --Melvin

**Market Outlook Conference, 7:00 p.m. Tuesday, April 3, 2001 at Fayette Branch of Glasgow Cooperative, Fayette. This conference is in cooperation with the statewide University of Missouri Extension quarterly outlook conferences being held April 2-3. Check with your Local University of Missouri Extension Center for the time at the nearest location.

University of Missouri ExtensionDecisive Marketing - March 30, 2001 -- Revised: April 20, 2004