December 31, 2018
We’ve looked at the profitability of corn and soybeans in previous columns. Now that we’re closer to the growing season and because projected prices for corn and soybeans have changed, here’s a review and examples with new numbers.
The bottom line is that profitability for corn vs. soybeans appears similar for 2019. Continuous corn still lags rotation corn and soybeans in Indiana in profitability. We saw several instances of soybeans after soybeans in 2018 because of economic comparisons when people made decisions. We expect that trend to disappear in 2019.
Let’s use the same case farm in west-central Indiana we used before. From 2007 to 2012, corn was relatively more profitable than soybeans. Earnings for rotation corn were, on average, $86 per acre higher than for rotation soybeans.
Since 2013, rotation soybeans have been relatively more profitable than rotation corn. The average difference in earnings for corn and soybeans from 2013 to 2018 was $79 per acre. The average difference in 2018 was projected at $73 per acre.
However, remember that soybean prices dropped substantially beginning in late May 2018. That affects relative profitability for corn and soybeans in 2019.
Using mid-December price projections, per-acre earnings for corn and soybeans in 2019 are expected to be similar. The advantage that soybeans held from 2013 to 2018 has disappeared. You may not have reaped the advantage in 2018 unless you used marketing techniques to capture a price advantage before soybean prices dropped.
Breakeven price levels for corn and soybeans to have the same profitability can be computed using cost and price estimates.
Using 2019 Purdue University agricultural economics budget projections, at $9-per-bushel soybeans, corn prices in fall 2019 would need to be above $4.32 per bushel on low-productivity land, above $4.24 per bushel on average-productivity land and above $4.11 per bushel on high-productivity land for continuous corn to compare favorably to rotation soybeans.
We’re going to offer a second soybean price option, $8.50 per bushel, in these examples. USDA and other projections for the 2019 soybean price cover a wide range, from $8 to more than $9 per bushel.
Assuming a fall soybean price of $8.50, breakeven levels would be $4.16, $4.07 and $3.95, respectively, on low-, average- and high-productivity land.
Breakeven levels for rotation corn on ground that was in soybeans in 2018, at $9 soybeans, are $3.95 per bushel on low-productivity land, $3.89 on average land and $3.76 on high-productivity land. Corn prices would need to be above these levels to favor rotation corn.
However, if soybean price is $8.50 in fall 2019, corn prices would only need to be above $3.79, $3.74 and $3.61, respectively, for rotation corn to compare favorably to soybeans.
In general, earnings per acre for corn and soybeans are expected to be very similar in 2019. More information about costs for corn, soybeans and wheat can be found on the website for the Center for Commercial Agriculture.
Langemeier is a Purdue University ag economist and associate director of the Purdue Center for Commercial Agriculture.
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