long term, cash rents tend to adjust to the economic conditions that affect
profits from corn and soybean production in Iowa. These adjustments do not take
place immediately, however. Moreover, the adjustments are small compared to
the changes in profits from year to year.
The tables that accompany this article show the estimated average returns to land from corn and soybean production over the past 11 years. They are compared to the estimated average cash rent paid in the state each year. In seven of those years returns were estimated to be higher than rents, indicating at least a small profit for the average renter.
The most disastrous year was 1993, when floods and heavy rains reduced crop yields severely, with only a modest compensation on the price side. Moderate losses
were estimated for 1991, due to low yields with only average prices. For 1999, margins are estimated to be slightly negative, or at best breakeven, due to the lowest market prices seen in years.
From 1994 through 1997, profit margins were estimated to be nearly $50 per acre, except for corn in 1997. This explains in large part the upward pressure on cash rents experienced in the past few years. It should be emphasized, however, that this analysis only represents general economic trends in the state, and may not be representative of any individual farming operation.
Table 1. Estimated net returns to land for corn-1989-1999 state averages lowa
|Crop year||Yield||Season price||Gross revenue||Govt. pmt.||Crop Ins pmt||Non-lad costs||Land return||Cash rent|
are the average Iowa yields for corn and soybeans as estimated by the National
Agricultural Statistics Service (NASS) each year.
Market prices are the season average selling prices as estimated by the Iowa Agricultural Statistics office. Mid-month prices for the period September through August of the following calendar year are weighted by the fraction of the crop sold in each month to estimate the average marketing price received. The season average price for 1999 is a projection.
Gross revenue was calculated by multiplying the average yield and price together. The average government payment per acre was estimated by dividing the total program payments for the state by the total corn and soybean acres. For the last two years, estimated loan deficiency payments were also added. The values represent payments accruing to each year's crop, although they may have been received in a different crop year.
Crop insurance payments were calculated by dividing the total indemnity payments made for corn and soybeans each year for FCIC backed policies by the total acres of corn and soybeans planted. Payments received from supplemental hail insurance policies were not available and are not included. It should be noted that while a significant average payment was received only in 1993, many farms prefer to selfinsure, and many others have received substantial assistance from crop insurance coverage in certain years.
The non-land costs were taken from Iowa Crop Production Cost Budgets (File A1-20) each year. Estimates include seed, fertilizer, pesticides, insurance, drying, transportation, machinery, labor, and other miscellaneous costs. Costs for seed and chemicals have increased substantially over the past decade, but more efficient use of machinery and labor has offset some of this increase. The estimated return to land was calculated by subtracting the nonland costs from the total of income from sales, government payments, and insurance indemni
The average cash rent paid in Iowa was estimated from Farmland Cash Rental Rates (File C2-10) beginning in 1994, and from USDA surveys before that. Comparing average rents to the estimated return to land provides a succinct look at the profitability of corn and soybean production in Iowa over the last decade.
2. Estimated net returns to land for soybeans-1989-1999 state averages-Iowa
|Crop year||Yield||Season price||Gross revenue||Govt. pmt.||Crop Ins pmt||Non-land costs||Land return||Cash rent|
Sources: Prices and yields from Iowa Agricultural Statistics. 1999 forecast. Costs from ISU Extension FM-1712, Corn following soybeans, medium yield. Crop insurance payments from FCIC data. Government payments from FSA. 1999 estimated.
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