Corn-Soybean Planting Decisions and Longer Run Returns

Continuous Corn to Corn-Corn-Soybeans

Switching from continuous corn to corn-corn-soybeans has the exact opposite effect of switching from continuous corn to corn-corn-soybean: returns will be lowered in the first year and then increased in later years.

First-year: In the first year, 2/3 of the acres will be continuous corn and 1/3 will be soybeans after two years corn. This combination will have a return of $453/acre, which is $14 less than continuous corn.

Second-year: During the second year, 1/3 of the acres will be continuous corn, 1/3 will be corn after soybeans and 1/3 will be in soybeans after two years of corn. This combination will have a return of $490/acre, $23 higher than continuous corn.

Third-year: In this year, 1/3 of the acres will be corn after soybeans, 1/3 will be corn after corn and 1/3 will be in soybeans after two years corn. This rotation will have a return of $504/acre, $37/acre higher than continuous corn.

The yearly sequence of difference in returns is:

• Year 1: -$14 lower return ($453/acre; $467/acre for continuous corn)
• Year 2: $23 higher return ($490/acre; $467/acre for continuous corn)
• Year 3 and beyond: $37/acre higher return ($504/acre; $467/acre)

Again this is a present value problem, with most discount factors indicating that the switch to corn-corn-soybeans has the higher return.