Soybeans More Profitable Than Corn Again This Year?

In the past three years, soybeans have been more profitable than corn in Illinois. And a reasonable chance exists for that scenario to occur again this year, according to Gary Schnitkey, University of Illinois ag economist.

Larger increases in corn costs compared to soybean costs make it more difficult for corn returns to exceed soybean returns, particularly at low corn and soybean prices, he noted.

From 2000 to 2012, corn was more profitable than soybeans in all years except 2002 and 2009, according to averages for high-productivity, central Illinois farmland managed by farmers enrolled in Illinois Farm Business Farm Management.

Corn returns exceeded soybean returns by very large margins in 2011 and 2012. From 2013 to 2015, soybean returns exceeded corn returns, an unusual three-year run compared to years between 2000 and 2012.

In 2016, corn is projected to be more profitable than soybeans; however, the difference is small and soybeans could again be more profitable than corn.

Schnitkey said corn always has had more revenue than soybeans. Between 2000 and 2006, the average difference in revenue between corn and soybeans averaged $119 per acre. Between 2007 and 2015, this difference became larger, averaging $247 per acre. The revenue differences were very large in 2011 and 2012, averaging $384 per acre in 2011 and $409 per acre in 2012, the same years in which corn returns exceeded soybean returns by large amounts.

Most of the cost difference between corn and soybeans comes in direct costs: fertilizer, pesticides, seed, drying, storage and crop insurance. In 2000, direct costs accounted for 81 percent of the total cost difference between corn and soybeans. This percentage has grown over time, reaching 94 percent in 2013.

Decreases in commodity prices make it more difficult for corn revenue to exceed soybean revenue by a wide enough margin to cover the cost differences.

Soybeans will likely be more profitable than corn unless a combination of one or more of the following four items occur:

            + Corn and soybean prices increase to higher levels than currently expected. If relative price increases are the same for corn and soybeans, higher prices cause corn returns to increase relative to soybean returns.

            + Relative corn and soybean prices change with the corn price increasing relative to the soybean price.

            + Corn yields are high relative to soybean yields.

            + The difference in corn costs decrease relative to soybean costs. Likely items that could contribute to this decrease are lower nitrogen fertilizer prices or lower corn seed costs.