Top 10 Ag News Stories of 2017: No. 1 Same Song, Fifth Verse: Record Corn Crop Again
OMAHA (DTN) -- Each year, DTN publishes our choices for the top 10 ag news stories of the year, as selected by DTN analysts, editors and reporters. We complete our countdown Friday with the No. 1 story of the year: defying expectations and weather extremes in various parts of the country, a fifth consecutive record corn crop emerged in the U.S. and sent prices diving.
As we end 2017, it will be remembered as the year when record corn yields were achieved in the face of the driest Corn Belt conditions since 2012.
The beginning of 2017 feels like it was about four years ago, but looking back, the year for ag started with excitement for the arrival of President Donald Trump and also harbored concerns of a possible trade war with China and uncertainty over the future of the North American Free Trade Agreement.
In the rearview mirror were four consecutive years of successful grain harvests, posing a big question for markets from the start: would U.S. weather cooperate a fifth consecutive year or would prices finally find a reason to trade higher?
Early in 2017, El Nino was still active, and it was reasonable to expect another summer of mild weather and adequate moisture across the Midwest. On the other hand, it was also fair to wonder how long this string of crop-friendly weather would last. The U.S. had a stretch of above-trend corn yields from 2003 to 2009, but the seven-year streak was unusual and even the ultra-bearish 1980s saw only four consecutive years of above-trend yields.
In late April, prospects for planting row crops had a green light as the Climate Prediction Center expected no drought around the Midwest through the end of July. A surprise snowstorm in western Kansas dumped a foot of snow on winter wheat. True to its hardy reputation, the wheat largely survived, allowing proud owners to post Twitter pictures of green fields weeks later.
About the same time, Missouri and southern Illinois were inundated with flooding rains. May saw wet conditions from Iowa to Ohio, requiring some replanting, but USDA's Crop Progress report insisted 96% of corn and 83% of soybeans were planted by June 4.
It was in May when things began to get interesting in the northwestern Plains, initially for spring wheat. On May 9, the Todd's Take column described bullish changes taking place in Minneapolis wheat, even before weather problems erupted. By May 25, the U.S. Drought Monitor showed its first patch of moderate drought conditions in the Dakotas, and conditions turned progressively hotter and drier each week.
Minneapolis wheat prices soared higher in June, but corn and soybeans were largely unaffected while traders showed concern about the prospect of record soybean plantings in 2017. That all changed on June 29 when the U.S. Drought Monitor showed an expansion of abnormally dry conditions into Nebraska and Iowa.
Suddenly, the market was talking about a potential drought in Iowa, possibly spreading to Illinois. Bearish concerns faded as December corn jumped to a high of $4.17 1/4 and November soybeans reached $10.47 a bushel on July 11, both marking their highs for the year just six days after wheat contracts did the same.
As often happens with weather markets, grain prices peaked before weather conditions got better. Going by the University of Nebraska at Lincoln's weekly U.S. Drought Monitors (http://bit.ly/…), the worst of the 2017 drought seemed to peak around mid-August, but it wasn't an easy call as Illinois got drier through September while rain came to the Western Corn Belt.
One of the oddest events of 2017 happened Aug. 10 when USDA released its first field-based corn yield estimate of 169.5 bushels per acre, an unusually high 3.5 bushels above Dow Jones' survey of analysts' pre-report guesses. Coming near the peak of concerns about dry weather, USDA's estimate looked out of touch, but traders responded, and at the end of the day, the price of December corn fell 15 1/4 cents to a new 2017 low, the start of a long downward journey.
Now at the end of 2017, we see USDA estimating a record corn yield of 175.4 bpa and shake our heads -- not in disbelief, but in amazement at how far seed technology has progressed to allow a 14.6-billion-bushel corn harvest in a year that saw the driest Corn Belt conditions since 2012.
In the case of soybeans, the record high 4.42-billion-bushel harvest was not a surprise, as the record planting of 90.2 million acres was well anticipated and aided by late-season rains when soybean pods were filling.
What is and continues to be miraculous about soybeans is how well supplies continue to move along after five consecutive big harvests from both the U.S. and South America. While spot corn and wheat prices remain near 11-year lows, pinned down by ample world supplies, spot soybean prices have stayed more profitable for producers, trading in the upper $9s.
Soybean producers had a right to be concerned about a trade dispute with China in early 2017, and they still have a right to be concerned today. On Dec. 20, Bloomberg news reported that China restricted the impurity levels in U.S. soybean shipments from 2% to 1%, an extra burden that is not being imposed on Brazil's shipments.
On the surface, not much has changed in 2017. Spot corn prices were down 1%, soybeans were down 4%, and Chicago wheat was up 4%. After watching corn hit a record yield in 2017, I suspect there is underlying nervousness about how high corn supplies will go if a year of good weather occurs.
So we finish 2017 with all the same questions we had at the beginning of the year. Here in late December, South America's weather looks off to another good start and there are more colors than usual on the U.S. Drought Monitor. As DTN Senior Analyst Darin Newsom wrote months ago in the title of one of his articles, "Forget Halloween, It's Groundhog Day Again."