You have already made the decision to plant more corn this year than your typical rotation. Did you stop at 10% more? Did you stop at 2/3 corn and 1/3 soybeans? If you are planting any soybeans at all, what spurred you to make that decision, since you have calculated that corn is going to provide more revenue than soybeans? If that is the case, why are you planting any soybeans? If you have not made a hard and fast decision, let’s think this through….

If you have some highly productive farmland, why not just plant 100% corn and lock in your profit with a revenue insurance product? That is the rhetorical question asked by Farm Management Specialist Gary Schnitkey at the University of Illinois in his latest newsletter. If Professor Schnitkey asked you that question in class someday, would you quickly break off eye contact, or would you make your way to the chalkboard and outline your reasoning? Let’s do the latter, with his help.

Calculating your crop income alternatives: Using futures contracts and adjusting for basis, your crop budget might project $3.80 for corn and $8.00 for beans. With second year corn yielding 170 bushels and beans yielding 55 bushels, plus $25 per acre in direct payments from the USDA, your gross revenue would be $671 for corn and $465 for soybeans. With typical crop production costs, plus a crop revenue coverage insurance policy, expenses might total $333 for corn and $216 for soybeans. So the net return to the operator and land is $338 for corn and $249 for soybeans, which is an $89 difference in favor of corn. By boosting corn from a 2/3-1/3 rotation to 100% on a 1,000 acre farm, you have increased your net by nearly $30,000.

Considering the crop insurance option: Crop insurance revenue products, such as CRC, RA, and GRIP can guarantee your revenue, and based on the price structure being built so far in February, it will guarantee profitability even before you get to the field. Schnitkey calculates a 165 APH yield, with a $4.03 base price and an 85% coverage level will guarantee a $565 indemnity. Consider the fact that your crop insurance indemnity is based on the futures price, but when you sell your grain, the basis is deducted, so a cash grain sale is going to net less than an insurance claim for the same amount of bushels.

So, is there any downside risk to 100% corn insured by a crop revenue policy?
There are some risks, depending upon several price and yield factors. Soybeans could be a more valuable crop if the price exceeded $9.61 on a 55 bushel yield, or if yields exceeded 66 bushels on an $8 price. Soybean could also be a more valuable crop if corn yielded less than 146 bushels on a $3.80 price, or if the 165 bushel corn was sold for less than $3.27.

Production risks may also figure into the final outcome: Corn takes longer to plant and has to be in the ground by early May to yield 100%
Corn takes longer to harvest and yield losses can occur if harvest is not timely.
A 100% corn crop increases production risk if pestilence strikes.
Your planning for 2008 becomes more complex since your 2007 acreage was all corn.

Summary: High yielding Cornbelt farmland will probably return more income in 2007 if planted to 100%, based on current crop prices and historical yields. However, higher soybean yields and prices, or lower corn yields and prices will negate that assumption. Many farmers will take the chance by planting 100% corn, but will also have to address the requirements of longer planting and harvesting periods since corn takes more time to plant and harvest than do soybeans.