While organic soybeans are a hot commodity, our friends from Mercaris reported that the domestic organic corn market finished the year strong with prices recovering from last year’s dips. Production reached a +9% year-over-year increase with harvests estimated to reach 49.5 million bushels. Mercaris noted that US organic corn producers are expecting to expand their crop production by 4%. The increase in organic corn production would expand harvestable area to nearly 392,000 acres, providing a potential 5% year-over-year increase in yields. They also reported that it was a record-breaking year for the domestic organic soybean market, where production was expected to reach a new high of 9.4 million bushels. Domestic organic soybean producers are seeking to increase their production fields to 252,000 acres. Their yields are expected to increase 5% year-over-year, providing 37.45 bushels per acre. Unfortunately, domestic organic wheat did not see the same boon as the domestic organic corn and soybean markets witnessed. Severe drought conditions across the High Plains depleted the yields of spring wheat, which fell -4% year-over-year to 19.6 million bushels. Mercaris said it does not expect any increase in organic spring wheat yield.
There was an article circulating that was written by David Becker and posted at FXEmpire regarding the great prices being paid for organic soybeans. I encourage everyone to read the full article HERE. Below are a few highlights that really caught my attention.
The first stone to drop was a ban of the largest certifiers from the U.S.’s most active organic soybean meal trading partner. Add in supply chain disruptions that generated a 5-fold increase in shipping prices. Cap the story off with an antidumping and CVD duty on organic soybean meal exporters from India who supplies 60% of annual inventories, and you have a price rally for the ages.
The U.S. is now left with a question of where they will get the organic grain proteins needed to feed poultry and dairy cows.
A year ago, organic soybean prices (Fastmarkets/The Jacobsen) delivered in the mid-West were trading near $20 per bushel. Today, prices are trading near $35-36 per bushel in the United States. At points in 2021, prices traded as high as $42 per bushel in specific East Coast locations in the U.S.
Consumers of organic feed proteins in the United States did not fully grasp demand and the enormous supply the United States received from its Indian trading partners. Fastmarkets/The Jacobsen, and reports from the International Trade Agency showed that nearly 400K metric tons of organic soybean meal were brought into the United States during 2020. Few could have imagined that looking forward to 2022, imports from India could be down by -80%.
Transportation is a major issue! In October 2020, bringing a container of organic soybean meal from India to the United States was approximately $90 per metric ton. Today, it’s closer to $600 per metric ton. Trucking rates in the United States were around $2.50 per load at the end of 2020, and today, they are closer to $4.0 per load.
2021 was an extraordinary year in the organic grain market. A good outlook is that 2022 will likely continue to be volatile. While the U.S. is likely to search for alternatives to Indian organic soybean and organic soybean meal, it is difficult to see who will fill the shoes left by India. The lack of supply will buoy prices and likely generate demand destruction once livestock producers cannot pass on rising costs to consumers. (Source: FXEmpire, David Becker, The Jacobsen)