Average corn yields changed little from 1996 to 1997, but harvest-time prices declined about 11% year to year.  Harvest prices were more than $2.80 per bushel in 1996, but in 1997, prices declined to about $2.50.

"As a result, average returns above cash costs fell by more than 20% from record highs in 1996," the report says.  Residual returns to management and risk declined about $30 per acre to a minus $18.78 on average among all U.S. corn producers.

At 1997 costs and yields, break-even corn prices at harvest were $1.57 to cover cash costs and $2.66 to cover economic costs.

"Despite little change in corn production costs between 1996 and 1997," the report continues, "declining corn prices late 1997 likely dampened expectations for 1998."

Returns to corn production declined most in the Southeast and Plains States.  Cash returns to corn production declined about $86 per acre, or 50%, in the Southeast, while residual returns were more than $90 per acre lower.

Corn prices in the Southeast were about 60 cents per bushel lower, and yields declined about 8% year to year.  During the 1997 harvest period, $1.84 corn was needed to cover cash costs and $3.11 to cover economic costs.

A 37% decline in the harvest corn price in the Plains States was responsible mainly for a 34% decline in cash returns.  To break even on cash costs, $1.66 corn was needed at harvest.  Returns greater than economic costs declined $39 per acre from 1996 to 1997 in the Plains States with $2.71 per bushel needed to cover economic costs.

Lower prices also reduced returns to corn production in the Corn Belt and Lake States.  The average harvest price for corn in the Corn Belt declined nearly 30 cents per bushel in 1997 and was more than 20 cents lower in the Lake States.  Returns above cash costs declined about 20% on Corn Belt farms, and returns above economic costs declined by more than $30 per acre.  Corn prices to cover cash and economic costs at harvest were $1.52 and $2.65 per bushel respectively.

Corn yields improved about 10 bushels per acre in the Lake States, offsetting some of the effects of lower prices.  Returns greater than cash costs improved by about $2 per acre, but residual returns to management and risk were about $5 lower.  The break-even harvest price was $1.55 per bushel for cash costs, and the lowest among all regions for economic costs was $2.56.