Estimated ACRE Payments in 2009 and 2010

My recent Illinois Farm Economics: Facts and Opinions estimated state ACRE payments for Illinois.  For 2009, state ACRE payments are estimated at $27 per acre for corn, $0 for soybeans, and $90 for wheat. For 2010, corn has an expected payment of $41 per acre and a 51% chance of making a payment, soybeans have an expected payment of $14 per acre and a 35% chance of making a payment, and wheat has an expected payment of $33 per acre and a 66% chance of making a payment.

Spring 2010 Fertilizer Prices

The Agricultural Marketing Service’s Illinois Production Cost Report for April 15, 2010 indicated that the average prices in Illinois for anhydrous ammonia was $532 per ton, DAP was $263 per ton, and potash was $492 per ton.  These prices have been fairly stable since January 2010 (see Figure below).

There were concerns that fertilizer prices could rise this spring due to poor weather last fall.  This poor weather will lead to more fertilization application in the spring of 2010, potentially leading to higher fertilizer prices due to bottlenecks in fertilizer production and distribution.  At this point, this does not appear to be occurring. 

Moreover, concerns that 2010 could be a late planting year do not appear to be materializing.  As of this date, spring fieldwork appears to be off to a good start, with an extended period of dry weather forecasted.

NRC Biotech Report

The National Research Council (NRC) released a report entitled Impact of Genetically Engineered Crops on Farm Sustainability in the United States. Overall press coverage of this report is positive on the impacts of bitechnology.

A National Public Radio (NPR) article quoted David Ervin chair of the committee producing the report: "What we found is that the farmers who adopted these genetically engineered crops have received both environmental and economic benefits. Although genetically engineered seeds often cost more, the farmers more than make up for the discrepancy by using less labor and fewer chemicals to product their crops."

One quibble I have with the above statement is the "less labor" aspect.  The report is likely using this in an "economic sense".  It is doubtful that use of biotech crops have a measurable impact on labor per acre of crop.  What  biotech crops do is make management more streamline in that certain pest and herbicide problems are more easy to deal with.

The Corn & Soybean Digest also had an article on the NRC report.  To some extent the Corn & Soybean Digest article was less positive than the NPR article, emphasizing weed problems that may arise because of resistance to glyphosate.

2009 County Cash Rents

The National Agricultural Statistical Service recently released 2009 cash rents for counties across the United States.  A map showing Illinois cash rents is avaialb on the NASS website.  A map also is available in a recent Illinois Farm Economics: Facts and Opinions (FEF0).  This article also compares 2009 cash rents to 2008 levels.

NASS data presents a mixed picture.  Some counties had cash rent increases while other counties had cash rent decreases.  There does seem to be some geographical dispersion in cash rent changes in that counties with dcreaes apper to be adjacent to one another (see figure).  After several years of large increases in cash rents, 2009 presented more of a stabilizing year in cash rents. 

Another item to note is that some counties had large changes in cash rents between 2008 and 2009.  In the FEFO article, I suggest that this is likely due to 1) local factors impacting cash rents and 2) sample variability when attempting to determine the average cash rent. 

Expected 2010 Corn and Soybean Yields

In a recent Illinois Farm Economics: Facts and Opinions article, actual 2009 corn and soybean yields for Illinois counties were compared to trend yields.  Overall, corn yields were slightly above average and soybean yields were slightly below average, with maps in the article illustrating the variability across counties.

Not included in that article were maps showing expected 2010 yields.  Figure 1 shows expected corn yields based on linear regression models fitted through data from 1972 to 2009.  As expected, the central part of the state has the highest expected corn yields, with Macon County having the highest expected yield of 186 bushels per acre.  There are twelve counties with expected yields over 180 bushels.  Of those twelve counties, all but Whiteside County is located in central Illinois.  The lowest expected yields are in southern Illinois, with Perry County having the lowest expected yield of 108 bushels per acre.

The same geographical pattern exists for expected soybean yields (see Figure 2).  Piatt county has the highest expected yield of 55 bushels per acre.  Central and northern Illinois have the highest expected yields while southern Illinois have the lowest expected yields.  Thirty-six countiies have expected yields above 50 bushels per acre.  Six counties have expected yields below 30 bushels per acre.

Expected yields provide a good estimate of yield for the coming year.  If 2010 could be repeated 20 times, the average of the 20 yields would be close to the expected 2010 yield.  

Yields tend to be skewed.  There are more observations above the trend than below the trend.  This may be why some believe that trend yields understate the true yields.  Given that more observations are above the trend, observation below the trend tend to be further away from the trend yield than those yields above the trend yield.  

Acreage Changes since Freedom to Farm

My recent Illinois Farm Economics: Facts and Opinions article documented changes in crop acreage changes in the United States since the 1995 Farm Bill. The 1995 Farm Bill, frequently called “Freedom to Farm”, eliminated most acreage constraints placed on farmers. Since “Freedom to Farm” passed, acreage changes likely reflect which crops farmers expect to be most profitable.

Between the early 1990s and late 2000s, soybeans increased by 14 million acres (24%) and corn increased by 9 million acres (14%). Hay and rice acreage remained relatively stable. The remaining crop with large acreages (over 1 million acres in 2008) had acreage declines. Wheat was the crop losing the most acres, having a decline of 12 million acres (19%). Crops losing over 1 million acres were barley, grain sorghum, corn for silage, and cotton. Peanuts, dry edible beans, potatoes, and sugarbeets had acreage declines of less than .5 million acres.

Most of the gains in soybean and corn acres occurred in the Midwest. North Dakota had the most increase in soybean and corn acres with a 4.2 million increase. Minnesota, Kansas, Nebraska, and South Dakota had increases of close to 3 million acres. Iowa, Missouri, and Illinois had increases over 1 million acres.

Several observations:

1. Much of the increase in soybean and corn acres was a substitution away from wheat. This switch likely is due to technological change in soybeans and corn relative to wheat. Between 1990 and 2009, national soybean and corn yields increased an average of 1.3% and 1.7% per year, respectively. In contrast, wheat yields only increased .6% per year. Biotechnology played a role, as there is a high adoption of biotech seeds for soybeans and corn. Wheat is not biotechnology altered.

2. Grain sorghum lost acreage. Since grain sorghum and corn are near substitutes, corn is likely substituting for grain sorghum. Again, technological change likely is the major influence of the switch away from grain sorghum. National grain sorghum yields averaged an increase of .5% per year compared to 1.7% for corn.

3. There is less diversity in crop grown in the United States. Of the crops having over one million acres in 2008, two grew in acres (soybeans and corn) while nine lost acres.

4. Biofuel uses have played a recent role in the increase in corn acres.

Evidence suggests that seed and genetic companies have placed much greater emphasis on developing soybean and corn seed rather than on the other crops. If this emphasis continues, soybean and corn technological gains may continue to outpace those of the other crops. This could then lead to continued gains in soybeans and corn acres. It appears that corn and soybeans are the crops that are increasingly relied upon to produce starches, proteins, and oils. The other crops will fill more of niche needs.