Editor's Note: 2021 was a wild one, from a tumultuous change in the White House, to continued La Nina influences on the weather, to skyrocketing fertilizer and input costs. There were also a lot of good stories to tell. As the calendar year comes to a close, we asked the DTN/Progressive Farmer writing team to pick their favorite effort from the year. The stories range from fun insights into ag entrepreneurs to serious investigations into the unintended consequences of popular production methods, to life lessons learned along the way to telling the tale. Each story also includes a link to the original story, in case you missed that. Enjoy a look back, with our eighth story, shared by Todd Hultman.
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OMAHA (DTN) -- Given the task by DTN editors of coming up with a favorite Todd's Take of 2021, it didn't take long to realize I had forgotten about a lot of the articles written earlier in the year and it wouldn't be easy to pick just one. Below are several favorites and some of the things we learned along the way.
The earliest article to catch my eye was posted on Jan. 26, "Does KC Wheat Deserve More Than $6.00?" (https://www.dtnpf.com/…). It was an extension of a conversation that started on Sept. 25, 2020, "HRW Wheat Ignores the Bearish Talk" (https://www.dtnpf.com/…), a column that highlighted the bullish potential of wheat prices.
Noting in January how spot KC wheat was trading at the highest level in six years, I counseled, "Forget the record production in 2020; forget the record ending wheat stocks, if there ever were any; and forget the past six years of prices sulking between $4.00 and $6.00. This is a new day ... or is it?"
After laying out the evidence, the article concluded, "After six years of depressed wheat prices, it feels strange to talk about wheat's bullish potential above $6.00, but it is legitimate." Yes, it was, as spot KC wheat traded as high as $8.87 later in 2021 and is still above $8.00 in December.
May of 2021 was a month that will long be remembered for extraordinary price peaks in corn and soybeans. For soybeans, the first hints of bearish trouble were written about in "Bearish Riddles in Soybean Futures" (https://www.dtnpf.com/…) on May 21 and followed by "Soybeans Bearish Collapse" (https://www.dtnpf.com/…) on June 25.
The early clues noted quick drops in soybeans' cash basis and soybean meal prices. As I commented, "Clearly, the surge of commercial demand we witnessed for cash soybeans across the Midwest in April and early May has cooled and we haven't seen it stabilize yet."
By June 25, the bearish clues were more obvious as DTN's National Soybean Index had fallen below its 100-day average. Even so, it was a confusing time, which I tried to explain. Looking back, I have to admit many market clues were leaning bearish, but I had a difficult time letting go of the notion that soybean supplies were as tight as USDA and several private estimates said they were. As has often been true since 2020, the fundamental assessments were the least reliable market factors -- a good lesson to carry forward.
"Corn's Roller Coaster Begins" (https://www.dtnpf.com/…) from May 28 was the most insightful analysis this year and for that reason, stands as my favorite Todd's Take of 2021.
Written three weeks after the May 7 high in cash corn prices, I said, "There is a good chance the May 7 high will stand as the high watermark for prices in 2021. I say that because the convergence of bullish factors in early April was so unique, it is unlikely this Humpty Dumpty of a rally will be put back together again."
The parting statements were also largely accurate: "As I see it, all this anxiety is going to give us a trading range much higher than what we've seen during the past seven years. Prices should eventually calm down, but not until we know a lot more about the new season than we do now."
As it turned out, DTN's National Corn Index traded within a wide, choppy triangle range for much of the summer, holding well above $6.00 until Aug. 20, when prices fell below support as rain showed up in the forecast and Hurricane Ida soon followed.
There were many other Todd's Takes that could have made the list, but the final one I want to mention also drew the most boos on social media. "New Trade Challenges For U.S. Agriculture" (https://www.dtnpf.com/…) posted on March 1 was originally intended to start an important conversation, but for some reason seemed to anger readers.
The premise was that the U.S. is encountering a new trade threat never faced before. The world's largest consumer of corn and soybeans for feed demand is being allowed to operate largely in the dark, while information about U.S. markets is available for all to see. The imbalance of information has put U.S. agriculture at an expensive disadvantage in terms of trade.
In 2020, China was able to successfully hide the fact it desperately needed corn and went on to purchase a record high 845 million bushels (mb) from the U.S. Much of the purchase was transacted at $3.00 and $4.00, aided by USDA's cooperation in promoting the illusion China had a surplus of over 8 billion bushels (bb) of corn -- an estimate USDA still stands by today. The magnitude of China's sleight of hand would impress Penn and Teller, but few in the U.S. want to admit it.
The greater problem, of course, is that U.S. trade disadvantages relative to China are not going away anytime soon. China's economy continues to outgrow the U.S. and it won't be long before China's economy becomes the largest in the world. There are things the U.S. can and should do to level the playing field and I offered several ideas in hopes of getting a conversation started.
For many U.S. growers, 2021 was either financially terrific or a disaster, depending on where they lived and how much moisture they got. If I was able to offer any helpful guidance, I have to give well-deserved credit to my predecessor, Darin Newsom, and DTN Editor Emeritus Urban Lehner for creating DTN's Six Factors Market Strategies many years ago, a disciplined approach to understanding markets that has stood the test of time.
Best wishes to all for a prosperous 2022.
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Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at [email protected]
Follow him on Twitter @ToddHultman1
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