Fundamentally Speaking

Joel Karlin
DTN Contributing Analyst

There has been a lot of discussion in recent years about increasing corn acreage at the expense of other crops.

In the Midwest, farmers used to plant both corn and soybeans for rotational purposes with soybeans, a legume helping fix nitrogen in the soil and that is beneficial for corn yields.

In recent years, the renewable fuels boom has boosted the demand and relative profitability of corn over soybeans so a number of operators have gone corn with corn on corn plantings despite the supposed yield drag associated with this type of cropping.

For 2014, the relatively high new crop soybean-corn ratio along with prospective net return per acre studies for various crops showing corn running just slightly ahead of soybeans vs. the clear-cut advantage it had in recent year’s points to increased soybean plantings and lower corn acreage.

A study of actual farm prices received does show that the soybean corn ratio has declined over the past 25 years, more so recently and this provides solid economic justification why farmers have opted to increase their corn acreage at the expense of soybeans.

This graphic shows the ratio of the annual average farm price received for both soybeans and corn for the top 15 corn and soybean producing states.

The 5, 10, and 25 year averages are plotted and for all states the five year ratio is lower than the 15 year ratio which in turn is lower than the 25 year ratio.

This means that soybean prices have gotten weaker relative to corn or corn has strengthened vis-à-vis soybeans.

Interesting to note that the soybean-corn ratios in MN, ND, and SD, albeit declining like the other states are much higher than the other states helping explain why soybean acreage in the Upper Midwest has increased quite dramatically in recent years.

(KA)