The Van Trump Report

Changing Trends in U.S. Corn Production Boost Productivity and Costs

Corn producers have undergone massive shifts in production practices in just the last couple of decades thanks to the introduction and adoption of GMO and precision ag technologies, as well as other impactful changes like farm consolidation and irrigation coverage. In the 20 year period from 1996 to 2018, corn accounted for over one-third of the planted acreage for the eight major row crops and was number one in value of production. According to the United States Department of Agriculture, during that 20 year period the U.S. corn industry increased acreage planted to corn, achieved higher yields except during drought years, and increased overall productivity per planted acre. At the same time, corn prices decreased from 1996 through 2005, climbed through 2012, and then declined again, leading to fluctuating net returns, which peaked in 2011. USDA recently crunched the data on technological and structural changes in U.S. corn production and describes how these changes have affected farm expenditures, net returns, productivity, yields, and production costs. Below are some of the highlights from the report, “Trends in Production Practices and Costs of the U.S. Corn Sector“: 

Major Changes in U.S. Corn Production:

  • GMOs: Genetically engineered seed varieties appeared on the seed corn market in 1996 and, with the introduction of stacked trait seeds—those with genes to produce up to three different traits—became increasingly complex. Steadily, producers increased their adoption of Bt (corn borer)-resistant, corn root worm-resistant, and herbicide-tolerant seed varieties.
  • Precision production technologies: Yield monitor and yield map adoption expanded, from 19% and 6% (respectively) in 2001 to 52% and 31% in 2016. In that same timeframe, self-propelled machinery with guidance systems (from 3 to 39%), variable-rate fertilizer (6% to 19%) variable-rate seeding (less than 1% to 15%), and variable-rate pesticide application (about 1% to 7%) were used on rising percentages of corn-planted acres, with rates of increase varying depending on the region.
  • The adoption of precision farming technologies has varied by region. Yield monitors were used on 62% of corn acres in the Heartland in 2016, for example, compared with 72% of acres in the Northern Great Plains. The two highest-adopting regions for guidance systems were the Northern Great Plains at 70% of acres and the Prairie Gateway at 57% of corn acres. The adoption rate for guidance systems in the Heartland was 48% of corn acres.
  • Irrigation: Irrigated acreage as a percentage of total corn acreage has declined steadily since 1996, from 15% of corn acres in 1996 to 11 percent of acres irrigated in 2016. The most notable changes occured in the Prairie Gateway region where the share of irrigated acres fell from 77% in 1996 to 39% in 2017. This may be due in part to the depletion of the Ogallala Aquifer having driven up irrigation pumping costs. The Northern Great Plains region dropped from 39% to just 10%. Rates of irrigation usage in the Heartland have been relatively stable, ranging from 5% to 6% over the period.  While overall irrigation rates have declined, the portion of irrigated corn acres with pressure systems has increased steadily, from 63% of all irrigated systems in 1996 to 77% in 2016.

The effects of these structural and technological changes in U.S. corn production can be seen in increased average corn yields and increased farm productivity, but also higher production costs:  
Corn Acreage

  • Over 88 million acres of corn were planted in the United States in 2018, an 11-percent increase from the 79 million acres planted in 1996. The average size of farms that planted corn followed an upward trend, with an average of 501 acres in 1997, 637 acres in 2007, and 725 acres in 2017. In the early part of the period, the average acres planted to corn per farm expanded nearly +50%, from 189 acres in 1996 to 280 acres in 2010. There was little change, however, beyond 2010; the average was 278 acres in 2016. Planted corn acreage peaked at 97.3 million acres in 2012.
  • Much of the corn acreage growth has been concentrated in the Northern Great Plains and Prairie Gateway regions. North Dakota, South Dakota, Montana, and Nebraska (mostly in the Northern Great Plains region) experienced a combined growth of +37% (4.9 million acres) in planted acres between 1996 and 2018. Corn production also increased substantially in Texas, Colorado, Arizona, and Oklahoma (mostly in the Prairie Gateway) with a +21% (700,000 acres) combined increase in planted acres between 1996 and 2018. The number of acres planted in States of the Heartland (Iowa, Illinois, Indiana, Missouri, and Ohio) increased by only +1.6 million acres, or +4%, during this period. Planted corn acres in the Northern Crescent, Eastern Uplands, and Southern Seaboard have remained relatively stable.

Yield and Production

  • Between 1996 and 2017, average U.S. corn yields increased by +42%, from 130 bushels per acre in 1996 to 185 bushels per acre in 2017. The Heartland bolstered the U.S average throughout most of the period with the highest yield of any region and increases in bushels per acre from 138 in 1996 to 197 in 2016, while the Southern Seaboard region had the lowest average yields across years, at 113 bushels per acre. Due to increases in both planted corn acreage and corn yield, total U.S. corn production grew from 9.2 billion bushels in 1996 to 14.6 billion bushels in 2017, an average of +2.2% per year. In relative terms, the Northern Great Plains experienced the highest growth in production, from 273 million bushels in 1996 to 1.2 billion bushels in 2016.

Production Costs

  • Over the study period, average production costs per acre nearly doubled from $161 per acre in 1996 to $341 per acre in 2016, with seed, fertilizer, capital (buildings and equipment), and land costs as major drivers. The largest percentage increase was from seed, which increased +263% from $27 per acre in 1996 to $98 per acre in 2016, with a steady upward trend mirroring the adoption of increasingly costly genetically engineered seeds. Fertilizer costs increased +149% during the period.
  • Nominal total allocated overhead costs per acre rose by +73%. The largest increase was in the opportunity cost of land, which is an estimate of how much money the farmer paid for rent per acre, or, if the farmer owns the land, how much money the farmer could get from renting the land out for other purposes. The opportunity cost of land increased by +98%, from $81 in 1996 to $160 in 2016. The increase in the opportunity cost of land mirrored an overall increase in agricultural land values over that period and reflects the increased productivity of corn production
  • Cost per bushel of corn production decreased as farm size increased up to and including farms of 750 acres in 2016. Economies of size appear to level out for farms between 750 and 1,500 acres. Total costs per bushel ranged from $4.66 per bushel for farms with under 200 planted acres of corn to a low of $3.75 per bushel for farms with more than 1,500 planted acres of corn.

Corn Prices

  • The season average corn price received by farmers climbed between 2005 and 2012, peaking during the 2012 marketing year at a national average of $6.89 per bushel, or $7.44 in inflation-adjusted 2017 dollars. This rise in prices coincided with the 2012 drought, which lowered production by more than -25%, as well as rising ethanol blending requirements. After resuming normal production trends in 2012, prices have ranged between $3 to $4 per bushel.
  • Between 1997 and 2016, during most years, U.S. net total returns per acre of corn were higher than those per acre of wheat, but lower than the net total returns for soybeans. Soybeans generated higher net total returns per acre than corn in most years, except in 2001 and 2002, when net returns for corn and soybeans were almost identical, and in 2010 and 2011 when corn prices were at their highest.

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