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Blog by Gary Schnitkey, Krista Swanson, and Nick Paulson, Department of Agricultural and Consumer Economics, University of Illinois and Carl Zulauf
Department of Agricultural, Environmental and Development Economics
Ohio State University

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The U.S. Department of Agriculture released 2021 corn and soybean supply balance sheets for the first time in the May World Agricultural Supply and Demand Estimates (WASDE) report. In the report, the market year average (MYA) prices for 2021 are projected at $5.70 per bushel for corn and $13.85 per bushel for soybean.

The 2021 projections are high relative to historical prices. We estimated gross revenue and returns for corn and soybeans on high-productivity farmland in central Illinois using these 2021 MYA projections. At those prices, returns for corn and soybeans will be at record levels, similar to returns from 2010 to 2012.

Market Year Average Prices
The May WASDE report contains a projection of $5.70 per bushel for corn in 2021. This 2021 MYA price is for the marketing year that begins in September 2021 and ends in August 2022. It is a national price, representing the average cash price received by all U.S. farmers for corn.

A $5.70 price would be the third-highest price in history (see Figure 1). Only the $6.22 MYA price in 2011 and the $6.89 price in 2012 exceed $5.70 per bushel (see Figure 1). From the 2012 high, corn prices declined, averaging below $4.00 from 2014 to 2019. Since 2019, corn prices rose to a projected MYA average of $4.35 per bushel for the 2020 marketing year that goes through August 2021, and are projected to increase further for the 2021 marketing year.

Similar to corn, the 2021 marketing year for soybeans begins in September 2021 and ends in August 2022. If it occurs, the $13.85 price for 2021 will be the second-highest price on record (see Figure 1). The highest price of $14.40 per bushel occurred in 2012. From the 2012 high, soybean prices declined, averaging below $9 per bushel in 2018 and 2019. Prices then increased to $11.25 per bushel projected for 2020 MYA. A further increase to $13.85 per bushel is projected for 2021, which would be $5.28 per bushel higher than the 2019 price, an increase of 61%.

Actual prices can vary from those projected in the first WASDE report. Last year, for example, the first estimate of the 2020 MYA corn price was $3.20 per bushel. The latest projection from the May 2021 report is $4.35 per bushel for the 2020 MYA corn price, $1.15 per bushel higher than the initial estimate. Similarly, the first projection of the 2020 MYA price for soybeans was $8.20, with the current forecast of the 2021 MYA price at $11.25 per bushel.

Many momentous events occurred in the past year. The introduction of the coronavirus resulted in control measures, resulting in negative impacts on many industries including agriculture. Mitigating these COVID-induced impacts have been robust export demand for soybeans and corn, with exports to China being considerable. COVID control measures now appear to be in the past. Currently, USDA is projecting a supply and demand situation that will result in very tight ending stocks at the end of the 2021 marketing year, particularly for soybeans.

WASDE price estimates are reasonable at this point, with the caveat that unexpected events do occur in agriculture like those that transpired in 2020. In addition, normal variations in price will occur because of growing season conditions in the U.S. Prices likely will be lower than WASDE projections if weather is conducive to high yields.

Conversely, prices could be higher if 2021 yields are low. As always at this time of the year, the actual price can vary considerably from the projection, as can be observed by the range in prices generated by the Price Distribution Tool, which is described in a May 11, 2021 farmdoc daily article.

Revenue Projections
WASDE price forecasts are used to project revenue and returns for high-productivity farmland in central Illinois. Figure 2 shows gross revenue for corn from 2000 to projections for 2021. Historical revenues come from central Illinois farmers enrolled in Illinois Farm Business Farm Management (FBFM) and are available in the management section of farmdoc (here).

Gross revenue includes crop revenue (yield times average price). Other revenue includes commodity title payments, crop insurance payments, and ad hoc government payments. In recent years Market Facilitation Program (MFP) and Coronavirus Food Assistance Program (CFAP) payments have been significant ad hoc government programs.

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