Projected 2013 Corn and Soybean Budgets

Budgets for corn and soybeans grown in Illinois for 2013 are now available on farmdoc (see here). Below, the 2013 budgets are compared to 2011 results and 2012 projections for crops grown in central Illinois on high productivity farmland. Overall non-land costs are projected to be roughly the same in 2013 as in 2012. Projected 2013 returns for corn are projected to be between 2011 and 2012 returns. Projected 2013 soybean returns are lower than 2011 and 2012 returns.

2013 Budgets

For central Illinois high-productivity farmland, 2013 yields are projected at 195 bushel per acre for corn and 57 bushels per acre for soybeans (see Table 1). These yields are trend-line yields. Prices used in 2013 projections are based on futures contracts and are $6.00 per bushel for corn and $12.50 per bushel for soybeans. These yields and prices result in crop revenue of $1,170 per acre for corn and $713 per acre for soybeans. No other revenues are included in budgets. In 2011 and 2012, $25 per acre is included for direct payments. Direct payments are not included for 2013 under the assumption that a Farm Bill will pass that does not include direct payments.

Non-land costs for corn are projected at $516 per acre in 2013, $4 per acre less than the $520 non-land costs for 2012 (see Table 1). Fertilizer costs are projected to be down slightly in 2013: $165 per acre in 2012 compared to $155 per acre in 2013. Offsetting fertilizer declines are increases in pesticide costs ($50 in 2012 to $52 in 2013), seed costs ($98 in 2012 to $100 in 2013), and machinery depreciation ($41 in 2012 to $43 in 2013).

Non-land costs for soybeans are projected at $308 per acre in 2013, $2 per acre higher than the 2012 non-land costs of $306 per acre (see Table 1). Fertilizer costs are projected to be down in 2013: $58 per acre in 2012 compared to $53 in 2013. Offsetting fertilizer cost decreases are increased in pesticide costs ($31 in 2012 to $33 in 2013), seed costs ($63 per acre in 2012 to $65 in 2013), and machinery deprecation ($39 in 2012 to $42 in 2013).

Operator and farmland returns in 2013 are projected to be $654 per acre for corn and $405 per acre for soybeans (see Table 1). The 2013 corn return is projected higher than the 2011 return ($573 per acre) but below the projected 2012 return ($699 per acre). The 2013 soybean return of $405 per acre is below the 2012 return ($419 per acre) and the projected 2012 return ($484 per acre). These fundamentals do not suggest that increases in cash rents should occur in 2013.

A major difficulty in projecting 2013 returns is determining the corn and soybean prices to use in budgets. The $6.00 per bushel corn price and $12.50 per bushel soybean price represent cash prices implied from futures contracts. These prices could change a great deal between now and harvest-time 2013, resulting in large changes in profitability.

In 2013, corn returns ($654 per acre in 2013) minus soybeans return ($405 per acre) equals $244 per acre. This 2013 difference is large compared to historical averages. Between 2005 through 2011, corn-minus-soybean returns averaged $75 per acre. The large projected difference in 2013 occurs because corn price is relatively high compared to the soybean price. The 2012 soybean-to-corn price ratio is 2.08. From 2006 through 2012, the soybean-to-corn price ratio averaged 2.38. Whether these relative prices persist into 2013 is an open question, depending on demand conditions and harvests in both North and South America. Whether these relative prices influence 2013 planting decisions also is an open question.

Summary

Current 2013 cost projections suggest that non-land costs will be roughly the same in 2013 as in 2012. Projected 2013 prices are based on futures contracts and result in projected 2013 operator and farmland returns of $654 per acre for corn and $405 per acre for soybeans. The corn return in 2013 is between the 2011 and 2012 returns. The 2013 soybean returns is below the 2011 and 2012 returns. These returns do not suggest increases in cash rents in 2013.

Appendix tables show budgets for northern Illinois, central Illinois with low productivity farmland, and southern Illinois. Look for modifications to 2013 budgets as economic conditions change.