December 19, 2006
CORN ACRE CHANGES LIKELY WILL VARY BY REGION AND FARM SIZE
In this paper, historical corn acre changes are examined to provide evidence on how Illinois farmers may change acres as a result of higher relative corn prices projected for 2007. If recent historical relationships continue, corn acres will increase more in northern Illinois than in central Illinois. Crop response in southern Illinois likely will be weather driven but increases are not likely to be as large as in northern Illinois. Furthermore, larger farms will increase corn acres more than smaller farms. While corn acres may increase in total, a significant portion of farms will decrease corn acres in 2007.
Data for this evaluation were obtained from Illinois Farm Business Farm Management (FBFM). To be included in this study, a farm had to average over 500 tillable acres. Acres planted to alternative crops were obtained from 1996 (the first year a Federal Farm Bill did not restrict acreage decisions) up to 2005 (the last year data were available). For each year, percent of tillable acres in corn – hereafter referred to as the corn planting percentage (CPP) – was calculated for each farm in each year. A CPP of 55 means that 55% of tillable acres were planted to corn
Since CPPs vary by region, results are presented for northern, central, and southern Illinois. Regional CPPs were compared to acreages reported by the National Agricultural Statistical Service (NASS). FBFM CPPs are roughly the same as CPPs calculated using NASS data. Hence, results presented here are generally reflective of all Illinois farms. As of this writing, FBFM data have not been compiled for 2006. NASS data suggest that 2006 CPPs likely will be 1 to 2 points below 2005 CPPs.
Change by Region
In all three regions, average CPPs increased (see Table 1). In northern Illinois, average CPPs began increasing after 2001. The CPP increased from 52 in 2001 up to 61 in 2005, an increase of 9 percentage points. In central Illinois, CPP increased from 48 in 1996 up to 54 in 2005. In southern Illinois, CPP increased from 38 in 2003 up to 44 in 2005.
Recent year-to-year changes were larger for northern Illinois than for central Illinois. Between 2003 and 2005, northern Illinois had an average, yearly CPP increase of 3.5 points (4 points between 2003 and 2004 and 3 points between 2004 and 2005) compared to a 2 point increase for central Illinois. If history holds, northern Illinois farms will increases CPPs more in 2007 than central Illinois farms.
CPPs in southern Illinois exhibit considerable year-to-year variability. This variability likely was due to weather conditions that determined whether corn or soybeans were planted. Weather conditions likely will again determine CPPs in 2007. While southern Illlinois farms may increasd corn acres, budgeting exercises suggest that CPPs in southern Illinois will increase less than in northern and central Illinois (see FEFO 06-18 “2007 Crop Budgets Indicate Higher Returns for Corn and Wheat”).
Change by Farm Size
Farms with more tillable acres have increased corn acres more than smaller farms. Table 2 shows yearly CPPs for alternative farm size classes. In northern Illinois, 1996 CPPs vary by only 2 points across the farm size classes: farm size classes with less than 3,000 acres had CPPs of 55 while the over 3000 acres class had a CPP of 53 (see Panel A ). By 2005 CPPs across farm sizes had a 10 point difference. The CPP in 2005 for farms with 500 to 1,000 acre class was 58 while farms with over 3,000 acres had a CPP of 68.
Similarly, larger farms increased corn acres more than smaller farms in central Illinois (Panel B) and southern Illinois (Panel C)
Variability across Farms
Averages presented in Tables 1 and 2 mask variability that exists across individual farms. For example, between 2004 and 2005, the average CPP in northern Illinois increased from 58 to 61, an increase of 3 percentage points. While the average is a 3 point increase, 41% of the farms decreased CPPs and 29% of the farms increased CPPs by more than 5 points (see Table 3). If this variability continues into 2007, a considerable number of Illinois farms will decrease CPPs even if the average CCP increases. Given this variability, it will be difficult to gain a feel of acreage response by speaking to only a few farmers.
If historical trends continue into 2007, farms in northern Illinois will increase corn acres more than central Illinois. Southern Illinois responses likely will be weather driven, but budgeting would suggest that corn acre increases will not be as large as in northern and central Illinois Furthermore, farms with more tillable acres likely will increase corn acres by a higher percentage than farms with less acres.
Acreage responses, however, will vary across farms. While it is likely that overall acres will increase, many farmers will decrease corn acres in 2007. Reasons for individual farm declines are likely farm specific. While current projected prices favor corn production, individual farmers will consider their individual farm situations when making decisions.
Data used in this study comes from local Farm Business Farm Management (FBFM) Associations across the State of Illinois. Without their cooperation, information as comprehensive and accurate as this would not be available for educational purposes. FBFM, which consists of 6,000 plus farmers and 60 professional field staff, is a not-for-profit organization available to all farm operators in Illinois. FBFM field staff provides on-farm counsel with computerized recordkeeping, farm financial management, business entity planning and income tax management. For more information, please contact the State FBFM Office located at the University of Illinois Department of Agricultural and Consumer Economics at 217-333-5511 or visit the FBFM website at www.fbfm.org.
Issued by: Gary Schnitkey, Department of Agricultural and Consumer Economics