Department of Crop Sciences University of Illinois at Urbana-Champaign

Agronomy Day 2006

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Revenue for Corn and Soybeans in 2006 and Beyond

Gary Schnitkey Gary Schnitkey
Farm Management Specialists
Department of Agricultural
and Consumer Economics
schnitke@illinois.edu
(217) 244-9595
Darrel Good Darrel Good
Extension Economist
Department of Agricultural
and Consumer Economics
d-good@illinois.edu
217-333-4716

We compare projections of per acre crop revenue plus government payments for 2006 through 2008 to revenues for the past five-years. Projections indicate that corn revenues for 2007 through 2008 could be significantly above the past five-year average. At the same time, soybean revenue could be near the last five-year average.

Revenue projections are calculated using trend-line yields for 2006 through 2008. Prices are forecast using information from supply and demand models and futures prices on Chicago Board of Trade contracts. Direct payments associated with the 2002 Farm Bill are included in 2006 through 2008 projections. Loan deficiency payments (LDPs) and counter-cyclical payments are not included as market prices are projected above levels that would trigger these payments.

For corn, central Illinois farms enrolled in Illinois Farm Business Farm Management (FBFM) having high productivity farmland averaged $439 per acre of crop revenue and government payments from 2001 through 2005. The highest revenue was in 2004 with $497 of revenue and the lowest year was 2002 with $382 of revenue. Revenue and government payments averaged $429 in 2005.

For corn, 2006 projections are for $457 per acre of revenue, $18 per acre above the previous five-year average of $439. The 2006 projection is based on a 174 bu yield, a $2.50 market price, and $22 in direct payments. The $2.50 market price results in no LDP or counter-cyclical payments. Because market prices are projected higher, revenues are projected higher for the next two-years, $488 in 2007 and $501 in 2008. If these projections hold true, revenues in 2007 and 2008 could reach those experienced in 2004.

figure 1

For soybeans, central Illinois FBFM farms having high productivity farmland averaged $343 per acre in crop revenue and government payments from 2001 through 2004. The highest revenue year occurred in 2004 with $378 of revenue and lowest year occurred in 2002 with revenue of $320 per acre.

For soybeans, 2006 projections are for $318 per acre of crop revenue and government payments, $24 below the last five-year average. The 2006 projection is based on a 51 bu yield, a $5.80 per bu soybean price, and $22 of direct payments. Projections for 2007 and 2008 are for $325 and $333 of crop revenue. These prices are based on yields of 51.5 bu in 2007 and 51.9 bu in 2008. Projected soybean prices are $5.90 in 2007 and $6.00 in 2008.

figure 2

Overall price projections result in relatively favorable revenue forecasts for the next several years. These higher prices also reduce LDP and counter-cyclical payments to farmers. Hence, revenue in the next several years may be more “market” based than in the last several years. Reductions in government payment also negate some of the impacts of higher crop revenues caused by higher market prices.

As always, forecasts of higher market prices may not come to pass. Expectations of high prices could result in market responses that could cause market prices to fall. Examples include larger plantings of corn in the United States and increases in soybean acreage in South America. For now, however, revenues look favorable for the short-term.