Market watchers often debate how the commodity markets must "buy" corn or soybean acres in any given year. In fact, price relationships may shift some last-minute acreage plans. But when you take into consideration all that goes into production, yield is the rotation trump card.

"Overall, relative yield increases favored corn production (in the last decade), while relative cost increases favored soybean production. Corn costs are higher primarily due to nitrogen and seed," says Gary Schnitkey, University of Illinois agricultural economist.

Schnitkey recently evaluated the factors that affect crop production profitability and risk over the last nearly 30 years. "Given that corn profitability increased relative to soybean profitability from 2001 to 2010, the relative yield impact more than offset the cost impact. Corn yield increases relative to soybean yields were the predominant factor in profit changes."

Schnitkey analyzed three time periods. He found corn was less profitable than soybeans from 1976-1988, about equal in profits from 1989-2000, and more profitable during 2001-2010.

"Since 2001, corn has generally been more profitable. Corn minus soybean returns averaged $28/acre with higher returns of an average $60/acre recorded from 2006 to 2010. We have seen a rise in corn acres relative to soybeans," he says. "But, corn was not the most profitable every year. Soybeans were more profitable by a large margin in 2002, 2005 and 2010."

The corn-to-soybean yield ratio climbed over the last three eras as well, meaning overall corn yields have increased relative to soybean yields. The yield advantage increased corn profitability relative to soybeans.

Schnitkey says the cost ratio also shifted. Corn costs relative to soybean costs were highest in 2001-2010, reducing corn profitability. But in the case of continuous corn, for example, Illinois yields would have to fall below 162 bu./acre for corn to be less profitable than soybeans.  

In the future, soybean yields would need to rise to enhance profitability. "On-farm management decisions, such as those related to planting timing and technologies, may have positive impacts on soybean yields. With no change in soybean profitability, however, the relative increase in corn profitability will continue to push farmers toward more corn," he says.

Maintaining higher profits with more corn acres will require cost control. Schnitkey says farms with more corn have higher costs, which could eliminate gains from adding more corn to the rotation. Machinery costs also increase. Heavier tillage requirements are costly. In addition, Schnitkey says farmers should invest in crop insurance to mitigate some of the risk of corn production. Yield drags may be seen between corn-after-soybeans and corn-after-corn, he adds.

"The incentive is still to grow more corn,” Schnitkey says. Costs may favor soybean production right now, but I do not anticipate any long-run implications from crop prices unless yields change," he says. "We will see a continued increase in corn profitability versus soybeans."