Economics of
Specialty Corn Production in Missouri
Joe Parcell
PIE -231
Table 1. Cropped Acres Planted to Value-enhanced Corn Varieties
U.S. Acres (1,000 acres)
1996 1997 1998 1999
White
575
550
725
775
Waxy
400
420
500
525
Yellow Food Grade
800
800 1000 1000
High-oil
400
700
900 1250
Nutritionally Dense
140
140
140
240
High Amylose
35
35
35
45
Source: US Grains Council
Price Premium (bu)
$.45 - .60
$.25 - .30
$.02 - .25
$.20 - .30
$.10 - .20
$1.20+
In summary, Illinois survey results indicated producers of valueenhanced corn varieties:
Required some additional capital investments;
Produced value-enhanced corn varieties to increase profits, capture
premiums, and diversify risk;
Required premium and contract specification information.
Per Acre Variable Cost Comparisons:
Regular Hybrid
Corn
$56.00
HOTC Corn
with 5%
Lower Yield
$56.00
Seed
29.70
44.92
Labor and Mgt
20.00
22.00
Drying
8.40
7.98
Mchy. rep., fuel & hire
15.00
15.00
Storage
16.80
18.48
Other Expenses
47.84
48.68
$193.74
$213.06
$1.61
$1.87
Fertilizer & Lime
Total
Variable Cost/bushel
B. TOTAL FIXED COSTS
C. TOTAL COSTS [A + B]
D. YIELD PER ACRE (Bushel)
E. BASE PRICE PER BUSHEL
d
E1. PREMIUM PER BUSHEL
F. NET GOVERNMENT PAYMENT
G. INCOME PER ACRE [(E+E1)D + F]
H. RETURNS OVER VARIABLE COSTS [G-A]
I. RETURNS OVER TOTAL COSTS [G-C]
J. VARIABLE COSTS PER BUSHEL [A D]
K. FIXED COSTS PER BUSHEL [B D]
L. TOTAL COSTS PER BUSHEL [C D]
$132.00
$325.74
120
$2.50
$0.00
$8.50
$308.50
$114.76
($17.24)
$1.61
$1.10
$2.71
$132.00
$328.71
120
$2.50
$0.05
$8.50
$314.50
$117.79
($14.21)
$1.64
$1.10
$2.74
$132.00
$345.06
114
$2.50
$0.14
$8.50
$309.46
$96.40
($35.60)
$1.87
$1.16
$3.03
$132.00
$332.25
114
$2.50
$0.15
$8.50
$310.60
$110.35
($21.65)
$1.76
$1.16
$2.91
B. TOTAL FIXED COSTS
C. TOTAL COSTS [A + B]
D. YIELD PER ACRE (Bushel)
E. BASE PRICE PER BUSHEL
d
E1. PREMIUM PER BUSHEL
F. NET GOVERNMENT PAYMENT
G. INCOME PER ACRE [(E+E1)D + F]
H. RETURNS OVER VARIABLE COSTS [G-A]
I. RETURNS OVER TOTAL COSTS [G-C]
J. VARIABLE COSTS PER BUSHEL [A D]
K. FIXED COSTS PER BUSHEL [B D]
L. TOTAL COSTS PER BUSHEL [C D]
$132.00
$325.74
120
$2.50
$0.00
$8.50
$308.50
$114.76
($17.24)
$1.61
$1.10
$2.71
$132.00
$328.71
120
$2.50
$0.05
$8.50
$314.50
$117.79
($14.21)
$1.64
$1.10
$2.74
What about oil content in high-oil corn??????????
$132.00
$345.06
114
$2.50
$0.14
$8.50
$309.46
$96.40
($35.60)
$1.87
$1.16
$3.03
$132.00
$332.25
114
$2.50
$0.15
$8.50
$310.60
$110.35
($21.65)
$1.76
$1.16
$2.91
Table 3. Effect on Bottom Line (Table 2) from Doubling Premium or All Varieties
having Same Yield
Base
Genetics
White
High Oil
($/acre)
Line I from Table 2
($17.24)
($14.21)
($35.60)
Double premiums listed on line E1
($17.24)
($8.21)
($19.64)
All yields the same, original premium
($17.24)
($14.21)
($19.76)
Waxy
($21.65)
($4.55)
($5.75)
Table 3. Effect on Bottom Line (Table 2) from Doubling Premium or All Varieties
having Same Yield
Base
Genetics
White
High Oil
($/acre)
Line I from Table 2
($17.24)
($14.21)
($35.60)
Double premiums listed on line E1
($17.24)
($8.21)
($19.64)
All yields the same, original premium ($17.24)
($14.21)
($19.76)
If yield was 160 bushel/acre and no yield drag??
Conventional
$119.59
White
$125.18
High oil
$124.16
Waxy
$138.76
Waxy
($21.65)
($4.55)
($5.75)
Segregation Costs
(source: USDA)
premium ($/bushel)
$0.60
$0.40
$0.20
$0.00
High-oil corn
Storage
Handling
STS soybeans
Risk Management
Non-biotech corn
Analysis/testing
Non-biotech
soybeans
Marketing
System vs. Component Decisions
• Component decisions - those which can be done
with little regard for other concerns
– what type of N fertilizer to use
– whether to buy a green or red machine
• System decisions - those which affect many parts
of the business
– deciding to grow a crop that requires special seed, field
identification, harvest, storage
Identity Preserved System
•
•
•
•
Market concerns
Financial concerns
Legal concerns
Production concerns
IP Market Concern
• First decision is to whom to market
• Markets expand beyond the local
– direct market to local users - HO corn to feeders
– processors
– electronic marketing
• Contracts establish market decisions
– production occurs without contracts
– contracts communicate standards from end user to
producer
IP Delivery
• 2 Delivery Contracts
– Harvest Delivery - deliver and price at harvest
– Buyers Call - set post harvest delivery date, price at
delivery
• Delivery date affects
–
–
–
–
cash flow
need for storage facilities
your ability to maintain quality during storage
actual price received (premium)
IP Production Concern
• Storage of grain if a buyers call contract is
obtained
– size of storage facilities needed
– contingency storage facilities - too little or much
– quality of grain kept in storage
• Adequate compensation paid for farmer
storage?
Premium ($/bushel)
Premium Schedule for High Oil Corn
0.3
0.25
0.2
0.15
0.1
0.05
0
6
6.4
6.8
7.2
7.6
Percent Oil
Buyer's Call
Harvest Delivery
8
IP Marketing Concern
• Are storage costs accurately considered?
• Is the premium sufficient for additional
costs?
• Is your planning regarding production and
marketing standards realistic? Does it take
into account a learning period?
IP Profitability
• As a system decision IP may be profitable
on one farm and not on another