Crops > Cost & Return > Profitability

Continuous corn versus corn/soybeans: do the relative prices change the profit comparison?

AgDM Newsletter
December 2011

Rotating corn with soybeans is the primary production rotation in Iowa due to higher corn yields and reduced costs. Corn following soybeans does not need as much nitrogen fertilizer and generally there isn’t a need for rootworm control.

As a result of these and other advantages the majority of Iowa’s corn is followed by soybeans or to a lesser extent, another crop. In 2011 it is estimated that Iowa will harvest over 13 million acres of corn for grain and over 9 million acres of soybeans. This means approximately one-third of the corn is continuous corn assuming soybeans is the major substitute.

The relation between planted soybeans and corn has changed over time. As shown in Figure 1, the percentage of soybean acres to corn acres showed considerable variation during the 1980s. From 1992 the percentage increased steadily until 2001, indicating relatively more soybeans and less corn. But since 2001 the percentage of soybean acres relative to corn acres has been dropping. In 2011, soybean acres were approximately two-thirds of the corn acres. This means almost a third of the corn acres are continuous, given the current cropping patterns in Iowa.

What is driving this change back to continuous corn? Is it the relative price change due to the increased demand for corn? Is it the lessening of the yield penalty for growing continuous corn? Is it the change in government programs? Or, is it a combination of factors?

When answering these questions it is important to consider the whole rotation. Evaluating a single crop in a rotation can give misleading results due to the rotational effects on costs and yields.

table 1

Table 1 shows the preliminary estimated costs of producing corn and soybeans in 2012. This table also shows the expected net returns per rotated acre assuming $6 corn and $12 soybeans.

Given the assumptions shown in Table 1, the corn/soybean rotation produces $30 an acre more profit.  But, if the continuous corn yields are increased five bushels per acre or if the price of corn increased to $8.24, the returns between the rotations are identical.

With an increase to 170 bushel continuous corn (CC) yield and 180 bushel rotated corn (RC) yields the returns are the same, given the assumptions listed in the table. This means the breakeven difference between rotated and continuous corn is 10 bushels per acre. With the prices and costs assumed in Table 1, if farmers expect greater than a 10 bushel difference in yield they should stay with the corn/soybean rotation. But, if the difference is less than 10 bushels, the continuous corn produces the higher return.

table 2Obviously the breakeven yield difference will change as relative price differences change. For example, if corn and soybeans increased to $7 and $13, respectively the breakeven difference would increase to 18 bushels. In other words, any CC yield less than 18 bushel lower than RC yield would make CC more profitable.

A long term rotation fertility study at the Iowa State University Northern Research Farm shows that the rotation effect is lessened by the amount and timing of nitrogen fertilizer. (Mallarino and Rueber, ISU, RFR-A01107) Table 2 presents the difference between the rotated corn yield and the continuous corn yield based on amount and timing of nitrogen application.

There is considerable variation in results between 160 pounds and 240 pounds of nitrogen. Additionally, the timing of the nitrogen application is also important. Notice, too, the difference between the 21 year average yields and the five year average yields. The yield advantage of a corn soybean rotation appears to be diminishing over time. The rotated corn will do relatively better under stress conditions.

Figures 2 and 3 show the RC yield advantage as a percent of the CC yield based on the timing and amount of nitrogen application. Notice how the relative yield advantage varies by year and application method.

figures 2 and 3

Tables 3 and 4 provide different ways to examine the relative advantage of the different rotations. In Table 3 the bushel advantage is listed and then the corn price necessary to equate the returns is shown. In Table 4 the bushel advantage needed for continuous corn is shown given different combinations of prices. For example, if the corn price is $5.94 and the soybean price is $13, Table 3 shows that any yield advantage for rotated corn less than five bushels per acre would mean continuous corn was more profitable.  Similarly Table 4 shows that with $6 corn and $13 soybeans the yield advantage necessary for continuous corn must be more than six bushels per acre.

table 3

table 4

Changes in varieties and the demand structure for corn have caused farmers to rethink the rotation they follow. When evaluating the rotation choice it is important to remember the yield differences and the cost of production differences. It is important to evaluate the entire rotation, not just single years within the rotation.

Farmers must also remember the impact of tillage on their rotation choices. They should also remember impacts that will go beyond the farm gate. Excess nitrogen is a source of water pollution and corn uses more nitrogen.

 

Michael D. Duffy, retired economist. Questions?