(Bloomberg) -- There was nothing typical about this year’s grain season in the U.S. Midwest, with one exception: The size of the corn crop.
Wild weather delayed plantings by the most on record, a strong dollar hurt exports, the trade war with China hit demand for the corn-ethanol industry and early snow meant some growers couldn’t even finish harvesting. Despite it all, the crop proved resilient.
“We ended up getting more planted than we thought,” said Heath Barnes, chief executive officer of Mercer Landmark, a farm cooperative in west-central Ohio. “We planted into terrible field conditions, and we thought yields would probably not be that great. It ended up being not bad.”
Farmers planted 89.9 million acres of corn this year, way more than the market had expected after a spring deluge sparked the record delays. The big number sent prices lower and angered farmers, who thought the figure must have been overstated. Growers were so upset that the U.S. Department of Agriculture was forced to pull all its staff from a crop tour after a government employee was threatened. After all that, samples gathered by scouts on the tour vindicated the agency’s yield forecasts.
Production is only projected to be about 5% lower than a year earlier even as floods left record amounts of land idle, with producers, especially in the Eastern Corn Belt, unable to get seeds in the wet and soggy ground.
The number of unplanted acres showed how troublesome the season had been, but it was also a signal for farmers that could get back in the fields to plant more corn, said Seth Meyer, an associate director at the University of Missouri and former chairman of the USDA’s World Agricultural Outlook Board.
“That’s how we ended up with that acreage that folks were really shocked with,” he said in an interview at the National Grain and Feed Association’s Country Elevator Conference in Indianapolis earlier this month. Farmers “need to get real comfortable with” the production estimates now from the USDA, he said.
March corn futures fell almost 5% this year to close at $3.875 a bushel on Tuesday.
Still, many farmers don’t believe the agency’s numbers and are holding back on selling. They’re expecting supplies to end up tighter than forecast, which would help prices recover.
Iowa grower Ben Riensche is still holding 90% of his corn harvest, protesting prices he says don’t accurately reflect farmer struggles. So far, he’s been proven right, with Chicago futures up 11% since a September low.
“We are going to have an explosive upside at some point,” he said. “I bet you an ice cream cone that we will be $4.20 a bushel by Valentine’s Day.”
Early winter weather also added to speculation that the harvest will end up smaller. Many bushels got left in the ground in northern states like North Dakota because of snow. Those crops could end up with yield losses between 20% and 40% when gathered next year.
Unharvested acres could tighten supplies after a stronger dollar helped send American exports down by more than 50% this season. Meanwhile, the trade war between Washington and Beijing had cut demand for the ethanol industry, where lower margins during the summer prompted many plants to shut down.
“With the bushels up north, I don’t think the market could handle it right now, so it’s kind of a blessing in disguise that some of that is postponed until later,” said Dustin Loseke, who manages an elevator in Waverly, Illinois, for U.S. grain handler Scoular Co.
The government offered a $28 billion bailout for farmers hurt by President Donald Trump’s trade wars. So far, that’s helped growers have enough cash flow to keep their corn in the bins. A recent partial trade deal with China could also benefit them if it helps boost ethanol exports and increases the amount of corn China brings in under quotas set by the World Trade Organization, a promise the Asian nation has never fulfilled. For now, market reaction remains muted.
“Farmers are just upset, irritated,“ said Joe Sanderson, CEO of the third-largest U.S. chicken producer Sanderson Farms. “They had a bad planting, and then they had perfect pollination and perfect rain. So they made more than they thought they were going to make.”
“They’ve had a bad time with this crop, and they don’t want to sell it,“ he said.
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