Scott Stirling hasn't had much trouble penciling out a profit on his corn crops the last three years. For reasons he was unable to discern earlier, his corn yields were rising while his soybean yields were declining. He switched to a 100% continuous-corn system and has not had any problems, or reservations, until perhaps this year.
“Plain and simple, I starting growing all corn because of the profitability it offered. My soybean yields dropped from near 70 bu./acre to 50 bu. and the corn kept posting steady, annual increases,” Stirling says.
The Martinton, IL, farmer's operation is in east-central Illinois, near the Indiana border. “I am now completely sold on continuous corn, although the profitability looks tight, if not nonexistent, for 2009.”
Stirling is concerned about the 100% corn approach this year because he hasn't been able to figure or lock in any profits yet based on market prices and crop input costs. As of early February, Stirling was estimating he would need more than 200 bu./acre in 2009 to break even. His farm average is about 195 bu./acre.
Such projections are in line with University of Illinois. Their data show a minimum $3.82/bu. for corn is needed with a 191-bu. average to break even in 2009, using mid-2008 crop input projections for a central Illinois highly productive farm.
Gary Schnitkey, Illinois Extension farm financial management specialist, notes that for corn, non-land production costs are projected to be about $529/acre, a $141/acre increase from 2008 levels. Between 2003 and 2007, non-land production costs averaged $286/acre. That means production costs for 2009 are projected to be $243/acre higher than the 2003-2007 average — an increase of 85%.
“Input costs are a huge problem, and I am still looking for ways to cut back on some costs. I am a faithful customer of a local dealer where I generally get all my seed, chemical and fertilizer,” Stirling says. “This year, though, I am doing some business on the open market to try and get a better deal, especially on nitrogen (N). It's pure survival.”
WHILE STIRLING CAN'T say yet how much higher his input costs will be in 2009 since he hadn't purchased everything at press time, he does know he'll spend more on just crop inputs in 2009 than he spent for all farm expenses for the entire 2008 season.
“I normally prepay expenses at the end of the year for tax purposes. Even if you borrow money to do that, it's cheaper than paying for items in season,” he says. “This year, I'm still hoping that some costs come down, so I haven't paid for anything. It is scary.”
Stirling didn't fall-apply any N. His minimum-till strategy includes running a Soil Saver after harvest and applying ammonium sulfate on the stalks. He makes one pass in the spring on the light, sandy loam soils. Pests and disease are rarely an issue. Stirling sprays for weeds, but uses no other products for disease or insect control.
He planted triple-stack corn hybrids in 2008, and plans to use the same in 2009. He likes using new seed technology the year after it becomes available so he can see how it performs on other farms for the first year. Knowledge of seed performance also allows him to be more confident in making his marketing decisions during the growing season.
“I have virtually no on-farm storage, so I generally head into harvest with about 75% of my corn sold. Right now, cash prices are below my $4 trigger,” he says. “I have faith the corn market will still go up enough to provide some opportunities to lock in a profit for 2009. I did not make any cash forward sales of my 2009 crop during 2008.”
Stirling does not subscribe to any marketing services. He prefers to attend advisory meetings and follow the markets to make sales decisions. “I usually start marketing the current year's crop in January if I can, and see how the crop progresses. I add to my sales in increments and try and take advantage of the market highs as they come,” he says.
IN 2008, STIRLING began selling corn once cash prices rose above $4/bu., pricing grain into the upper $5 range. By the time corn reached $7, he had already sold all he was comfortable selling ahead, given crop conditions and yield projections at the time. He notes the price dropped so low at harvest that he had to sell the rest of his crop at lower levels than he wanted and didn't anticipate a price rise that might cover the cost of storage. He averaged about $4.15/bu. for the year.
Stirling today cash rents half of the acreage he farms from several different landlords and with farm managers. He feels fortunate his cash rent average is well below the $200 statewide average, which he says also contributes to his continuous-corn profitability.
“To some extent, I am still learning about farming. I am a first-generation farmer who started in the business when I was 28. I worked construction prior to that,” he says. “I was fortunate to find a landlord years ago who wanted to work with someone just getting into the business. I have been able to expand to full-time and hire my son Alex.”
Stirling is also a director for the Illinois Corn Marketing Board, which he says gives him a pool of farmer friends across the state where he can get good ideas and helpful advice. He plans to remain an all-corn farmer, if he can.
“Since I didn't fall-apply N, I know in the back of my mind I can still plant soybeans. I just don't want to,” he says. “My options are open, but I am optimistic I can still go all corn. I know if I hang on, the outlook will eventually get better.”