Thursday, December 15, 2011
Are You Planting Rotational Or Continuous Corn In 2012?
Some years back, many Cornbelt farmers switched away from a 50-50 corn and soybean rotation. The idea was to take advantage of better potential corn revenue since herbicides and other chemicals were more efficiently controlling pests than the 100% annual rotation. Increased corn acres have resulted, but how do you calculate the best acreage mix of corn and beans?
Over time, the percent of soybeans, compared to corn acres, has changed in Iowa, says economist Mike Duffy. About 1980 there were 6 bean acres for every 10 of corn, but that changed to 9 acres of beans for 10 of corn in 1983. Significant shifts occurred every 3-5 years as the rotation edged closer to 50-50. Since 2001 the shift has been rapidly departing 50-50 and is now less than 7 acres of beans for each 10 acres of corn.
In a recent newsletter, Duffy says that means one third of the corn in Iowa is continuous. While some farmers might look at a single crop and determine the revenue, Duffy says the entire rotation has to be evaluated to avoid being misled. Based on $6 corn and $12 beans, Duffy tabulated $138 of revenue from continuous corn, $284 revenue from rotated corn and $52 from soybeans. The corn-soybean rotation would average $168 per acre.
Duffy says if the rotated crops produce $30 more per acre than continuous corn, it would take a five bushel increase in corn or a per bushel price of $8.24 to equalize the two. By increasing the continuous corn yield from 165 to 170 and keeping the rotated corn yield at 180, Duffy says there is a 10 bushel breakeven difference. He says if your breakeven difference is more, then stay with your rotated crop. But if your difference is less than 10 bushels per acre, continuous corn will produce a better return.
The breakeven yield difference shifts as the relative price shifts. A few months back, when corn was $7 and soybeans were $13, the breakeven difference would have been 18 bushels; and any continuous corn yield that was less than 18 bushels lower than the rotated crop yield would make the continuous corn more profitable.
Now, add another dynamic to this equation and vary the timing and volume of nitrogen applied to the corn. Those were the variables in research that found the rotation effect is lessened by the amount and the timing. The result was a smaller breakeven gap if the nitrogen was applied in the spring, versus the fall, and if higher amounts of nitrogen were used. Duffy said the yield advantage of the rotation also appears to be diminishing, with rotated corn still doing better under stress conditions.
The Iowa State economist said small variations in prices can also shift continuous corn into a revenue advantage position. Those factors can also become important along with changes in varieties of corn and the demand structure for corn, “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.” And Duffy added that tillage can also have a yield impact on rotations.
Summary:
Many Cornbelt farmers saw continuous corn suffer from dry conditions late in the growing season, and may wonder if they should return to a more normal rotation with soybeans. Many factors can affect the breakeven yield, which determines if there is more revenue in rotational corn or continuous corn. Among those are volume and timing of nitrogen application, tillage, corn varieties.
Posted by Stu Ellis on 12/15 at 01:07 AM | Permalink
Comments
Posted by: Sharon Squires at December 15, 2011 9:09AM
Saying Good Bye to Dec 2011 CME Corn Chart
An image hidden in the summertime clouds can provide a moment of fun. “Can you see that Energizer Bunny holding a Michael Jordan pose?” The high concentrated view of the daily CME Group’s Dec 2011 corn chart provided a similar moment. “Can you see the classic depiction of the warm weather front colliding with the cold front?” This illustration is generally used to show how a thunderstorm forms. The lighter, wetter, warm front (low pressure, pre September 2011 prices) is pushed skyward when it “hits” or is “hit” by the heavier, drier, cold front (high pressure, post September 2011 prices). The lighter, moisture rich, warm front produces rain when the capacity to hold that moisture is reduced by the cooler temperature of the higher altitude. Generally the greater the difference in temperature, difference in pressure or as may be in this case the greater the difference in price the more sever the storm.
The weather warning for the 2012-13 marketing year is fairly easy to understand from the
fundamental point of view. (The turning of the technician’s charts into fluffy clouds seems to have limited value.) A short term, 10 year, trend line of corn and soybeans acres and the relationship between them shows a chance of harvesting over 87 million acres of corn and 73.5 or more million acres of soybeans. The current weak demand numbers with reasonable yields would/could/should/might make current future’s prices look respectful. However the current corn-soybean price relationship points to something like 2 million less corn harvested acres and about the same increase in soybeans. That could/would/should/might add something like $0.50 to the fall futures price in a “risk off” environment. The potential for tighter ending stocks, with lower harvested corn acres, has the potential to turn risk back on, resulting in even higher fall prices.
Marketing year 2012-13 looks to have a demand base that is stable at best. This light demand tied with huge harvested acres could result in a level of potential price risk not seen in quite some time. Revenue crop insurance, even with a “low” established price, may make a good start for most growers. (The APH adjustment looks to be what was needed here in NW IL.) Others may wish to find other methods to more aggressively take advantage of price opportunities, most with a crop insurance floor. A continuing drought of some areas of the country with the potential of it “creeping” into others is another factor for consideration.
The collision of the two price fronts in the Dec 2011 chart seems to point to a storm ahead. Big acres and low demand appear to be currently in prices. Our guess points to early pricing opportunities but risk has never seemed higher. From time to time it is fun to look for “cloud bunnies”.
Jib aka Gibberish
Posted by: Jib at December 16, 2011 3:03AM
Well, we will actually plant sorghum ahead of short day corn if weather allows. That’s what we did last year.
Sharon:
Are you cutting the sorghum for silage as part of your dairy ration?
~Stu