Corn-Soybean Planting Decisions and Longer Run Returns

Corn-Corn-Soybeans to Continuous Corn

Given the budgets in Table 1, this switch will increase returns in the first year but decrease returns in later years.

First year: Returns will increase in the first year as soybean acres are replaced with more corn. In the first year, the return will be $518/acre, which equals the average of 1/3 of corn-after-soybeans returns ($578/acre), plus of 1/3 corn-after-corn ($510/acre) and 1/3 continuous corn returns ($467). The $518/acre return is above the $504 return for corn-corn-soybeans.

Second year: In the second year of continuous corn, returns will decrease. One-third of the acres will be in corn-after-corn with a $510/acre return and 2/3 will be continuous corn with a $467/acre return, giving a return of $481/acre for the continuous corn rotation in the second year. The $481/acre return is below the $504/acre return for corn-corn-soybeans.

Third year: In the third year, all land will be in continuous corn having a return and have a projected return of $467/acre. The $467/acre return is below the $504 return for corn-corn-soybeans.

The yearly tradeoffs of moving from corn-corn-soybeans to continuous corn are:

• Year 1: $16/acre higher returns ($518 for all corn; $504 for corn-corn-soybeans)
• Year 2: $23/acre lower returns ($481 for all corn; $504 for corn-corn-soybeans)
• Year 3 and beyond: $37/acre lower returns ($467 for all corn; $504 for corn-corn-soybeans)

Since there returns vary over time, this is a present value problem. Under current realistic discount factors, present value calculations suggest corn-corn-soybeans is the most profitable rotation over time.