Per-acre projected corn and soybean returns for the 2012 production year are compared here to returns for the years 2001 through 2011. At the time of writing this abstract, 2012 returns are projected to be above historical averages, based on the assumption that 2011 yields will be near or below trend levels, leading to little rebuilding of grain stocks. Low stocks then will likely lead to continued high commodity prices so as to ration supply and encourage production during 2012. In early June, futures prices suggest 2012 corn prices in the range of mid-$5 per bushel and soybean prices around $13 per bushel. Obviously, there is considerable uncertainty about those prices, as both supply and demand conditions could change over the next year.
There was a large break in corn and soybean returns in 2006. Returns have been higher since 2006 than before. From 2001 through 2005, corn returns for cash-rent farmland in central Illinois on high-productivity farmland averaged $59 per acre from 2001 to 2005. From 2006 to 2010, corn returns averaged $186 per acre. Given 2012 price projections, returns in 2012 will likely continue to be higher than in the 2001– 2005 timeframe.
A continued point of emphasis will be corn returns relative to soybean returns. From 2006 through 2010, corn returns have exceeded soybean returns by an average of $56 per acre. In 2011, corn returns are projected above soybean returns by a much higher margin. This large difference results from an overall tighter supply– demand situation for corn than for soybeans. Whether these outlooks change will be greatly influenced by 2011 summer weather.
Summaries of corn and soybean returns across farms show corn has been more profitable than soybeans. However, farms that have raised more corn have not been necessarily more profitable than those raising more soybeans. According to Illinois Farm Business Farm Management records, farms that have raised more corn on average have higher power costs than farms raising less corn. These costs, along with benefits associated with corn–soybean rotations, can offset higher returns from corn. Cost management thus remains a key in farm profitability.
Continued high returns bring ongoing questions of whether they will come to an end. The answer is yes, but predicting the timing of declining returns is difficult. Recent history does provide some illustrations of what may cause lower returns. In 2009, returns were low relative to other years since 2006. While low returns were partially caused by higher costs, prices in 2009 were also lower. During 2009, average prices received by central Illinois farmers were $3.52 per bushel for corn and $9.80 for soybeans. Excluding 2009, the average price for 2007, 2008, and 2010 was $4.45 for corn and $10.91 for soybeans. Given current cost levels, corn prices below $4 and soybean prices below $10 per bushel will result in lower returns. Hence, an extended period of such prices could cause a period of lower returns. Normal yields and rebuilding of stocks could easily lead to a period of lower prices.
For 2012, projected prices above $4.50 per bushel for corn and $11 per bushel for soybeans likely will lead to positive returns. Price projections below $4 per bushel for corn and $10 for soybeans likely will lead to lower returns.
Professor of Agricultural and