U.S.-China Sign Phase One Trade Agreement— On January 15, President Trump signed the Phase One Trade Agreement with China, signaling a major step toward ending the two-year struggle between the two countries to reach an agreement. As part of the agreement, China committed to purchasing an additional $200 billion of American-made goods and services over 2020 and 2021. China pledged to buy at least $80 billion of U.S. agricultural products over two years, including $12.5 billion of purchases in 2020 above 2017 levels. While the final total in 2020 fell short of that, it was still a lot closer than many thought possible. The pace of China purchases will continue to be closely watched in 2021. 

Coronavirus pandemic temporarily scuttles corn market— As the magnitude of the deadly coronavirus pandemic took hold in early spring across the U.S., many states issued stay-at-home orders for citizens. The subsequent widespread decline in driving saw ethanol production plummet nearly 50% in April, which took a toll on corn prices. May corn futures, after posting a calendar year high of $3.98 ¾ on January 23, collapsed nearly $1.00 to trade at $3.00 ¼ on April 29—a decline of nearly 25%. Needless to say, the economic outlook for corn producers was worrisome as planting of the 2020 crop got underway in mid to late-April.    

Derecho windstorm leaves path of destruction across Iowa, other parts of Midwest—On Aug. 10, a weather complex known as a “derecho” sent intense winds and thunderstorms across a 700-mile stretch in the heart of the U.S. Corn Belt from Nebraska to Indiana. Winds reportedly reached 110-140 mph, equivalent to those of a Category 3 or 4 hurricane, flattening crops and destroying grain bins.  In the hardest hit state of Iowa, more than 50% of state’s corn and soybean crop was severely damaged.  Damage to Iowa’s homes, farms, businesses, livestock and crops was estimated at $4 billion. The USDA in October said that the number of crop acres that Iowa farmers were unable to harvest increased 850,000.

La Niña weather pattern adds concern to global grain and oilseed supplies—During the last half of 2020, atmospheric indicators reflected the development of a maturing La Niña weather pattern. Chances of La Niña conditions continuing in January through March 2021 are greater than 95%, with a 65% chance of continuing through March to May. La Niña weather pattens are typical of drier weather in major grain producing areas of Argentina, Brazil, Black Sea and southern grain belt of the U.S. Current dry weather is those regions is adding a major concern to global grain and oilseed supplies.

Rapid recovery in China’s pig sector —A deadly outbreak of African swine fever (ASF) in the summer of 2018 eventually led to widespread culling of infected and affected pigs. There were ideas that recovery in China’s swine industry would take several years. Implementation of stimulus measures by the Chinese government, however, has accelerated the recovery. For example, local governments in China were instructed this fall to provide financial incentives to pig farms. Some contend that the size of China’s pig herd in 2021 will increase to 80% of that prior to the outbreak of ASF. The pace of recovery will ultimately have an impact exports of U.S. pork to China, which surged during this past calendar year.

Live cattle, lean hog futures plummet after COVID-19 shutters meat plants— The coronavirus pandemic also affected livestock markets. As increased cases of COVID-19 spread during the spring, lockdowns of slaughter plants were seen across the Midwest in an effort to stem the spread of the virus. As a result, a large backlog of market-ready cattle and hogs developed. At the retail level, consumers saw prices for beef and pork skyrocket due to the reduced supply. Simultaneously, live cattle and lean hog futures plummeted on supply concerns. Eventually, slaughter plants were able to resume operation, which allowed the market to work through the backlog and futures markets recovered. 

U.S., Mexico, and Canada officially sign trade pact—On January 29, the U.S. officially signed a trade pact with Mexico and Canada. This agreement, better known as USMCA, replaced the North American Free Trade Agreement (NAFTA), which created a trilateral trade bloc more than 25 years ago across North America, and which went into effect on January 1, 1994. This revised trade agreement was seen as a major win for farmers and ranchers and will have long-lasting impact on trade. The agreement is expected to increase agricultural exports from the U.S. by more than $2 billion, and result in an overall increase of $65 billion in gross domestic product. 

Record U.S. exports of corn, soybeans forecast— A combination of factors resulted in the USDA forecasting record exports of U.S. corn and soybeans for the 2020/21 marketing year. The aforementioned U.S.-China Phase One Trade Agreement set the stage for China to return to the U.S. soybean market in a big way this year. In addition, domestic corn prices in China soared to record highs, leading to a resumption of significant imports of U.S. corn. A reduction in the size of the corn crop in Ukraine also helped fuel increased interest in U.S. corn. Yet another factor fueling the recovery was a weaker U.S. dollar, which in December slipped to the lowest level since April 2018.

Soybean, corn, wheat futures reach multi-year highs—In mid-August, price prospects for soybean, corn and wheat futures were bleak amid prospects for ample domestic and world supplies.  Lower-than-expected U.S. corn and soybean yields helped stem the bearish tide, however, while concerns about world production prospects boosted wheat. Over the final 4 ½ months of the calendar year, all three markets staged a major resurgence. The leader of the pack was soybeans, with nearby futures at the end of December reaching the highest level since the summer of 2014. Corn futures, meanwhile, climbed to the highest point since the spring of 2014, while wheat futures also soared to a 6-year peak.

Unpredictable events underscore the need for disciplined risk management—A myriad of fundamental, trade and unforeseen factors seen in 2020 resulted in increased price volatility. Whether it was the signing of new trade agreements with China, Mexico and Canada, the onslaught of the coronavirus pandemic, a surge in export demand led by China, or a devastating windstorm across the Midwest, there was always something that seemed to take the market by surprise. What these unpredictable market developments consistently underscored was the importance of working with a trusted risk management consultant to execute a disciplined marketing program.