Tuesday, July 16, 2013

WASDE Report Gives Lower Price To Corn And Soybeans

AgFax.Com - Your Online Ag News Source


Returns and Cash Rents given $4.80 Corn and $10.75 Soybean Prices

The U.S. Department of Agriculture recently updated its World Agricultural Supply and Demand Estimates (WASDE), with the midpoints of 2013/2014 price estimates being $4.80 per bushel for corn and $10.75 per bushel for soybeans. These prices are significantly below prices in recent years, suggesting that agricultural returns may be lower in 2013 and 2014. These lower returns then may lead to the need to re-evaluate cash rents. Herein, returns at a $4.80 corn price and a $10.75 soybean price are examined by calculating operator and farmland returns for three different farmland productivities. These returns then are compared to current cash rent levels.

Operator and Farmland Returns

Operator and farmland returns – equaling gross revenue minus non-land costs – represent the amount of return that can be split between a land owner and a farmer. Take an operator and land return of $350 per acre and a cash rent of $300 per acre. In this case, the farmer receives $50 per acre ($350 operator and land return – $300 cash rent). When cash rents exceed operator and land returns, the farmer faces losses.

As shown in Table 1, operator and land returns are calculated for three different farmland productivities: High, low, and lower. High and low productivities are based on yields and costs from central Illinois farms summarized by Illinois Farm Business Farm Management (FBFM). “Lower” productivity has corn and soybean yields below central Illinois averages summarized by FBFM.

tab1b.jpg

For high productivity farmland, corn yield is expected to be 195 bushel per acre, resulting in $936 gross revenue given a $4.80 corn price. Subtracting $563 of non-land costs gives an operator and land return for corn of $373 per acre. Soybeans are expected to yield 56 bushels per acre, resulting in $602 of gross revenue at a $10.75 soybean price. Subtracting $350 of non-land costs from $602 gross revenue gives $252 of operator and land return for soybeans. Herein, two-thirds of the acres are assumed to be planted to corn and one-third to soybeans. This crop mix gives $333 of operator and land return per acre.

Operator and land returns are less for the remaining two land productivity classes. Low productivity farmland has a 183 bushel per acre corn yield and 53 bushels per acre soybean yield. Operator and land return for low productivity farmland is $291 per acre (See Table 1). Lower productivity farmland has 160 bushel per acre corn yield, a 50 bushel per acre soybean yield, and a $211 per acre cash rent.

Comparison to Recent Average Cash Rents

On April 9th, a farmdocdaily post released estimates of 2013 cash rents on professionally managed farmland based on a survey conducted by the Illinois Society of Professional Farm Managers and Rural Appraisers (available here). The midpoint cash rent is $396 per acre for excellent qualify farmland with corn yield over 190 bushels. The $396 per acre cash rent is above the $333 operator and land return calculated above for high productivity farmland with a 195 bushels per acre expected corn yield.

The Illinois Society reports a 2013 midpoint cash rent of $339 per acre for farmland with corn yields between 170 and 190 bushels per acre. Low productivity farmland with a 183 bushel per acre yield has an operator and land return of $291 per acre (See Table 1). Similar to high productivity farmland, the current cash ret not $339 per acre is above the $291 per acre operator and farmland return.

The Illinois Society reported a 2013 midpoint cash rent of $285 per acre for farmland with expected yield between 150 and 170 bushel per acre. In the calculations above, lower productivity farmland with a 160 bushel per acre corn yield has $211 per acre of operator and land return (see Table 1). Similar to the higher productivity class, the $285 per acre cash rent exceeds the $211 operator and land return.

Professional farm managers tend to have above average cash rents. The USDA reports average cash rents by county (see this farmdocdaily article for a map here). A number of these average cash rents are near the above calculated operator and land returns, particularly in central Illinois. For example, average cash rent is $324 per acre in Sangamon County, $326 in Macon County, $313 in Logan County. These averages are only slightly below the $333 per acre operator and land return for high productivity farmland. Given that there is a wide range of rents summarized in an average county cash rent, there likely are a large number of cash rents above the operator and land returns shown in Table 1.

Operator and Land Returns for Differing Prices

Price realizations greatly influence operator and land returns, as illustrated in Table 2. Take a $.40 increase in corn price from $4.80 to $5.20 and an $.80 per bushel increase in soybean price from $10.75 to $11.55. This results in a $67 per acre increase in operator and land return from $333 per acre to $400 per acre.

tab2.jpg

As price expectations change, returns will change as well. This then leads to a need to re-evaluate cash rents.

Summary

Price in the high $4.00 range for corn and high $10 range for soybeans are being projected for next year. Much more will be known about price levels once clearer expectations of 2013 corn and soybean yields are reached. If prices are in the high $4.00 range for corn and $10 range for soybeans, returns will be lower than in recent years. As a result, cash rent levels may need to be re-evaluated, particularly for situations in which the current cash rent is above average.

Tags: , , , ,


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    Rice Market: Unexpected Action in Futures This Week10-31

    Rice Crop: Texas 2nd Crop Not Very Promising10-31

    Grain TV: Basis Levels Improve10-31

    AFB Grain-Soybean Close: Wheat Down, Gains in Corn, Soybeans10-31

    AFB Cotton Close: Futures Retrace Wed. Gains10-31

    AFB Rice Close: Futures End on Positive Note10-31

    South Carolina Cotton: Southern Southeastern Annual Meeting, Hilton Head, Jan. 21-2410-31

    Cleveland on Cotton: Goblins Keep Coming – Look for Jan. Rally10-31

    DTN Livestock Close: Short-Covering Boosts Live Hog Futures10-31

    BT Soybeans: MON 87751 Gets Non-Regulated Status by APHIS10-31

    AgFax Rice Review: Drought Hammers Cali. Crop; Surface Ozone Reduces Yields10-31

    Crop Tech: Orange Corn; BT-Soybeans; Frozen Oats – DTN10-31

    Grain Farming Economics Look Grim for 2015 – DTN10-31

    Crop Insurance: 3rd Option for Crop Payment Yield Update10-31

    DTN Cotton Close: Mixed After Late Rally10-31

    Mississippi Wildlife: Responsible Hunting Maintains Future Populations10-31

    DTN Grain Close: Soybean Complex Ends Week Higher10-31

    Mississippi Pecans: Off Year May Impact Holiday Volume10-31

    USDA: Peanut Price Highlights10-31

    Georgia Pecans: Good Demand, Lighter Crop Expected10-31

    Four States Cattle Conference Set Dec. 10 in Texarkana, Ark.10-31

    DTN Livestock Midday: Live Cattle Contracts Shift Lower10-31

    DTN Grain Midday: Corn, Wheat Trading Lower10-31

    AgFax Wildlife Review: Wild Hogs Could Put Scare in Trick-or-Treaters10-31

    DTN Cotton Open: Futures Dip Near Session Low10-31

    DTN Dried Distillers Grain: No Rally in Prices Expected10-31

    DTN Livestock Open: Cattle Contracts to Begin Firm10-31

    North Carolina: Irrigation Conference Slated Nov. 6 in Raleigh10-31

    DTN Grain Open: Soybeans Start Out Higher10-31

    Keith Good: Turkey Investigates U.S. Cotton Imports, Demand May Suffer10-31

    Doane Cotton Close: Strong Exports Continue10-30

    ELS Cotton Competitive Payment Rate Is Zero10-30

    Biodiesel: 2014 A Tough Year for Producers10-30

    Kansas Officials Point Out Flaws in Clean Water Act – DTN10-30

    Future Farmers Face Major Challenges, Ag Sec Tells FFA – DTN10-30

    U.S. Grain Transportation: Barge Rates Remain Well Above Average10-30

    Mississippi: Fall Tests for Nematodes Help Keep Crops Healthy10-30

    California’s SJV Included in Report on Soil Loss Due to Salt Damage10-30

    U.S. Energy: Gas Prices Drop to Lowest Since December 201010-30

    Gasoline Prices: Average Drops 6 Cents10-30

    Propane Stocks: Down 1.3M Barrels10-30

    Diesel Prices: Decrease by 2 Cents10-30

    New Research Study Shows the Value of Neonics10-30

    Texas: Pecos County Pesticide Workshop, Fort Stockton, Nov. 1810-29

    Florida: Sugarcane Field Day, Quincy, Nov. 310-29

    Texas Wildlife: New Deer Management App Just in Time for Deer Season10-29

    Peanut Stocks: Utilization Up 6%, Stocks Total 1.2B Pounds10-29

    Texas Pecans: Fairly Light Deliveries, Good Demand10-29

    Louisiana Pecans: Deliveries Insufficient to Establish Prices10-29

    Georgia: Brooks County Clean Day Rescheduled to Nov. 1210-29

    AgFax Cotton Review: U.S.’s High Quality Offers Market Resilience10-29

    Georgia: USDA Designates Early County Primary Natural Disaster Area10-29

    Why Chinese Consumers Pay More for Non-GMO Soy Oil – DTN10-29

    DTN Fertilizer Outlook: Demand May Fall with Crop Prices10-29

    Grain Math – Can you Pass the Test? – DTN10-29

    Welch on Wheat: Crop Condition Right on Average10-28

    Welch on Grain: Corn Harvest Runs Behind but Conditions Remain High10-28

    USDA: Weekly National Peanut Prices10-28

    Mississippi Wild Hogs: Trapping Is the Best Control Method10-28

    DTN Fertilizer Trends: Stubborn Prices Pose Dilemma for Grain Farmers10-28

    Corn Prices: How Do You Handle a Nervous Market? — DTN10-28

    Georgia Peanuts: Spider Mite Damage Rises in Dry Weather10-28

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney