Corn and soybean prices that result in $50,000 of net farm income are estimated for a 1,200-acre farm in central Illinois. A corn price of $3.70/bu. and $8.51/bu. for soybeans results in $50,000 of net income on a grain farm that purchases crop insurance and owns 15%, share-rents 45% and cash rents 40% of its farmland.


Farm situation

The $50,000 benchmark net farm income roughly represents the average farm income during the late 1990s and early 2000s. During this period, many farms were “holding their own” financially, with some farm s having deteriorating financial positions. Given today’s cash flows, a $50,000 net farm income would result in financial deterioration on many farms.

Parameters of the farm are set to be typical of a grain farm in Illinois. The farm has 1,200 acres with two-thirds planted to corn and one-third planted to soybeans. Corn yield is 190 bu./acre and soybean yield is 55 bu./acre. Non-land costs are $515/acre for corn and $300/acre for soybeans and represent values approximately equal to costs in 2012 Illinois Crop Budgets (see table).

The farm purchases revenue protection (RP) crop insurance at the 80% coverage level. The actual production history yields are 190 bu. for corn and 52 bu. for soybeans. Projected prices are set at $5.50 for corn and $13 for soybeans, anticipating these price levels for futures contracts during February 2012.

There are 1,200 tillable acres, with 15% owned, 40% share-rented and 45% cash rented. These values are typical for grain farms in central Illinois. The cash rent is $280/acre (see table).

Debt outstanding is $300,000 for operating notes, $180,000 for intermediate debt and $300,000 for long-term debt. In determining prices, soybean price is kept at 2.3 times the corn price.