Returns on Corn-Soybean Farms by Size of Unit and Implications for Land Values

Use of the Illinois Farm Business Records is made to obtain costs by size of unit and levels of physical production. These costs are compared with different price levels (either market or target) and the residual return is related to land values under selected land purchase circumstances occurring in the market. Results show that the cost of producing corn ranges from $1.20 to $1.40 if no cost is assigned to land. When land costs are added at 5% interest on a "normal" land value, costs per bushel of corn are approximately $2. 00 or somewhat more. Non-land costs of producing corn went up approximately 25% from 1974 to 1976. The effect of costs is different on tenants than landowners, because cash costs for a landlord are a smaller proportion of total costs than for a tenant unless the landowners have substantial land debt. There are many factors other than rate of return which affect land prices giving a much less than perfect correlation between land prices and land returns. Some of these factors are discussed.