Crop budget update
USDA’s Prospective Plantings report that will be released at the end of the month is based on surveys of farmers at the beginning of March. With that in mind it is a good time to look at crop budgets to see which crops offer the highest net returns over operating costs based on current new-crop futures prices. For this exercise we use the December corn price of $4.85 per bushel and the November soybean price of $11.78.
click image to zoom It is useful to note that fertilizer prices have turned higher in the last couple of months. Since bottoming out in December, retail prices for urea have increased by about 16 percent and prices for DAP are up 9 percent. Prices for anhydrous ammonia and potash are about steady with prices in December but are still down 28 percent and 20 percent year-over-year respectively. Prices for urea are down 9 percent from a year ago and DAP prices are 13 percent lower. For this analysis we cut fertilizer costs per acre by 15 percent from the estimate used for the 2013 crop.
The last time we updated the budgets, the December 20 issue of AgInsight, net returns over operating costs for corn for 2014 were $55 per acre higher than those for soybeans. At that time the new crop corn futures contract stood at $4.55 per bushel and soybeans were $11.66. Clearly, the bounce in corn prices over the last several weeks has been bigger than the rise in soybean prices. In December we had fertilizer costs per acre down 18 percent from the 2013 level. Our forecasts for other input costs really haven’t changed much since December.
The analysis shows net returns for corn above those for soybeans by about $96 per acre now with revenue of $797 and operating costs of $332 per acre. For soybeans revenue is $518 and costs are $150 per acre based on the national budgets. Net returns for corn over operating costs are higher in all six regions where USDA has historical budgets for both crops. But the advantage for corn is smallest in the Heartland region which is the major producing region for both crops. In the Heartland region, net returns for corn come in at $482 per acre versus $453 per acre for soybeans. In contrast, net returns for corn exceed those for soybeans by $169 per acre in the Prairie Gateway region which is mostly the Plains states. The soybean-to-corn price ratio has increased from year ago levels, but not dramatically. Last year the ratio was 2.31 compared to the current ratio of 2.43.
click image to zoom The budgets show a clear advantage for soybeans over spring wheat in the Northern Plains region. Net returns for soybeans are near $275 per acre versus $155 per acre for spring wheat. However, this relationship has not provided much insight into acreage shifts in the last several years. With millions of acres left unplanted in the Dakotas last spring, higher acreage for both spring wheat and soybeans are likely with better weather this year.
Doane is currently conducting our own planting intentions survey and data will be available in a couple of weeks. At least as of now, we expect corn acreage to decline modestly from the 2013 level of 95.4 million acres, but the decline is much larger when compared to the 99 million acres farmers wanted to plant last year. Soybean acreage is expected to increase to a record high this spring. USDA’s Prospective Plantings report will be released at noon eastern time on March 31.
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