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Calculating Costs, Yields and Program Payments Can Aid in Planting Decisions

Calculating Costs, Yields and Program Payments Can Aid in Planting Decisions

Calculating Costs, Yields and Program Payments Can Aid in Planting Decisions


Knowing your "dirt" may be the key in deciding between planting corn and soybeans this year.

By using yield information, production costs and government program payment figures, farmers can determine whether corn or soybeans will offer the best returns, said Steve Riggins, University of Kentucky grain marketing specialist.

"The key is knowing your dirt," he said.

Based on some of his own calculations, Riggins said farmers likely will see that corn offers the best return on their good soils while soybeans will be a better option on lesser quality soils. Government program payments play a key role in those calculations, he said.

Corn prices this winter have been somewhat disappointing, Riggins said.

Supply/demand ratio is tighter than in the past two to three years, yet prices haven't increased much.

Lack of winter pricing rallies may be attributed to disappointing exports since Sept. 1. To date, sales are trailing behind last year's levels. Another reason may be that the markets are anticipating what farmers will do in the next few weeks.

"They think you are going to plant more corn," he said.

Estimates indicate corn acreage could increase by 2.5 to 4 million acres.

The first sign of what farmers are planning for the 2002 growing season will be known when the U.S. Department of Agriculture releases its planting intentions report March 28, Riggins said.

If intentions are less than 78 to 80 million acrees, that could set the stage for a spring pricing rally, he said. Those rallies induce farmers to overproduce, Riggins said.

Riggins urged farmers to watch the markets and if they haven't already started selling their 2002 crop, they should consider selling at least some of the crop. This strategy would be most applicable for farmers with on-farm storage who have the opportunity to forward price for a January/February 2003 delivery using a hedge-to-arrive type contract.

Currently, the March 2003 corn futures contract is trading above $2.40 per bushel. In many areas of Kentucky farmers could reasonably expect to eventually convert a $2.40 plus a March hedge-to-arrive contract for January/February 2003 delivery into something close to $2.50 to $2.55 per bushel.

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Scovell Hall Lexington, KY 40546-0064