One of the greatest stories in the history of agriculture is the increase in corn yields over the last several decades. Although weather ultimately influences yields for a given year, the underlying trend across the country is that more bushels of corn can be expected each year.
These great scientific increases generally work to increase the productivity of farmland and are an important factor in determining the rate of return that investors will earn on farmland investments. While you often hear about the national trend yield when it comes time to estimate the size of the expected corn crop, we decided that it might be interesting to examine how yield trends varied across counties in three different states: Indiana, Illinois, and Iowa from 1950 to 2012.
For the yield trend of a county, we calculated the rate at which yields were increasing over time (a time trend analysis). For instance, a county yield trend of 1.5 bushels per year would mean that, on average, the yield increased by 1.5 bushels per year from 1950 to 2012.
We were somewhat surprised to see that there are great differences in yield trends across different counties in three Corn Belt states. These differences were large and could play a significant role in determining the earnings that farmland owners will receive over the long-run.
In the first figure, the mean of county yield trends for the three states is shown. Immediately obvious is that Iowa has the largest yield trend. The county average yield trend is nearly 16% higher in Iowa than in Indiana.
A closer look at the distributions of county yield trends by state shows there is also a wide distribution of county yield trends within the states. Figure 2, below, shows the distribution of county yield trends for IN, IL, and IA. While very few counties in Indiana had trend-yields greater than 1.9 bushels per acre per year, nearly 60% of counties in Iowa experienced these high levels of annual yield growth.
While the differences in yield trend might seem small on the surface, consider two scenarios on a hypothetical field that yielded 150 bushels per acre in 1994, 20 years ago. The first scenario is a high trend yield of 1.9 bushels per year. The current average yield would now be 188 bushels per acre. The second scenario is a slow yield trend of 1.2 bushels per year. After 20 years, the current expected yield would only be 174. Twenty years created a yield difference of 14 bushels per acre. Over an entire career, the difference can become substantial.
What's the point of the story: Know what kind of yield increases you might expect over time when you buy that farm and assess carefully whether the farm is priced appropriately.