1. Next up this morning is the corn/soy planting decision this spring. USDA Prospective Planting report indicated US farmers planned on 97MA of corn and 83.5MA of soybeans. Will we really plant that many acres of corn now? Big question.
2. GS analysis of the economics of corn/soy decisions can be found in this #FDD article farmdocdaily.illinois.edu/2020/04/revisi… and from this webinar yesterday farmdoc.illinois.edu/event/acreage-…
3. Key table is found below. Expected loss for corn here in IL is -$107 and expected loss for soybeans is -$40. So the changes in prices post-CV have swung incentives decisively in favor of soybeans at this point. $67 advantage using $3.30 corn and $8.30 beans.
4. As of today, corn bids about 10 cents lower, about $3.20. That makes soybean expected profit almost $90 per acre higher than corn. The question is whether IL farmers will be swayed or not by this turn of events?
5. What about other parts of the Corn Belt? I looked at bids today for my home area of WC IA. New crop corn bid is $3.04 and soybeans is $7.81. Ouch.
6. As a rough estimate let,s apply WC IA bids to Gary's budget. Loss for corn is $163 and loss for soybeans is $73. Same $90 dollar difference as with IL bids. I doubt relative production costs are that much different between IL and IA, so incentive strong in IA to plant beans
7. Some people point to the possibility of big ARC/PLC payments with low corn prices as supporting big corn acres. While this may be influencing farmer decisions, it makes zero economic sense. Let me repeat. ARC/PLC payments should have no influence on corn/soy decision.
8. ARC/PLC payments are based on base acres and yields and therefore the payments are independent of actual planted acreage in 2020. Hence, these payments should not influence the corn vs. soybean planting decision. Note this does not hold for ARC-IC.
9. I think it would be helpful to move the ARC/PLC revenue item in the table below all the way to the bottom to make it clear that this item does not depend on what you produce in 2020. You can literally take your corn and soybean ARC/PLC $ and allocate however you want.
10. The bottom-line is that only market revenue and crop insurance payments are relevant to the corn vs. soybeans planting decisions. If any future MFP payments are like last year and not tied to 2020 production, then they should not be considered either.
11. Despite all this analysis, I am somewhat skeptical that US farmers will be moved much away from their clear preference to plant corn over soybeans. Maybe a swing to soybeans of 2-3 million acres at most. What are you hearing #AgTwitter?
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