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Tuesday, March 14, 2017

Another Way to Evaluate $3.40 Corn

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Another Way to Evaluate $3.40 Corn
Gary Schnitkey, Agricultural Economist - University of Illinois

Farmers across the United States aren’t very happy with the price of corn in Chicago. However, as Todd Gleason reports, a University of Illinois study shows they might reconsider what that price really means given the very good yields most harvested last fall.

Price times yield equals income…
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Price times yield equals income. It’s a pretty simple calculation, but one that’s pretty easy to dismiss when the price is really low. Gary Schnitkey wondered a bit about that as it relates to the nation’s corn and soybean farmers. So, the University of Illinois agricultural economist took some time to figure out just how close to the countywide trend-line yield every corn and soybean growing county in the nation came last fall. Most, he says, especially for soybeans, were above trend.

Schnitkey :55 …yields were in New York and Pennsylvania.

Quote Summary - Yeah, so we used data from 1972 up to the present to fit our linear trends. There are areas that had below trends, most notably Ohio and Indiana. Ohio, particularly, had below trend yields on corn. The counties along the Mississippi River starting in Indiana and southern Illinois and going a way down through Arkansas, the boot-heal of Missouri, Mississippi, and Louisiana had below trend yields. New York and Pennsylvania had below trend yields. Many of the counties that had below trend yields on corn were in the eastern United States. Soybeans, on the other hand, most everybody had above trend yields. We had an exceptionally good yielding year on soybean. Areas where we had below trend yields were in New York and Pennsylvania.

Here’s an example of what all that means. Schnitkey uses Sangamon County Illinois where the trend-line yield for 2016 was a 194 bushels to the acre and the actual countywide corn yield was 222.

Schnitkey :28 …above trend yields we have higher incomes.

Quote Summary - That has a sizable impact on revenue, right. We took that above trend and multiplied by a $3.40 price, which is what WASDE is projecting right now, and found that just above trend added about $95 (per acre) compared to a normal trend-line yield for Sangamon County (Illinois). That is a significant amount. In those areas of the world with above trend yields we have higher incomes.

You may check out Gary Schnitkey’s county-by-county trend-line yield maps and yield differentiations for corn and soybeans on the farmdocDaily website.