U.S. Organic Soybean Volatility Persists After Global Disruptions

Ryan Koory, for CME Group

IN ONE LOOK

• U.S. organic soybean prices reached $40.52/bushel in May 2022, up nearly 110% from $19.37/bushel in January 2021.
• Since the start of the 2021/22 marketing year, trade tensions between the United States and India have caused Indian organic soybean meal imports to contract by 78% through April 2022

Over the past decade, US organic markets have been riding a wave of rapid growth in consumer demand. According to the US Organic Trade Association’s industry survey, from 2011 to 2021, organic food sales in the United States grew at an average rate of 9% per year, outpacing the annual growth rate of 5% of non-organic food sales.

While consumer demand has paved the way for an expanding US organic industry, its rapid pace has left a gap between domestic use and production in US organic food markets. In 2021, U.S. imports of organic corn, soybeans, and soybean meal for livestock feed reached $594 million, up 22% from 2015. In comparison, the value of organic feed produced in United States reached $397 million in 2021, according to estimates by the organic price evaluation agency Mercaris.

Market value of organic food in the United States

Import growth has had a stabilizing effect on US organic markets. This has been especially true for US organic soybeans. In the 2020/21 marketing year, the U.S. supply of organic soybean meal – the main source of protein for organic livestock and poultry feed rations – nearly doubled from 2014/15 following a 80% increase in protein feed demand for organic livestock feed rations. . The ability of supply to grow at this rate has been largely supported by escalating imports, which reached 83% of US organic soybean meal supplies in the 2020/21 marketing year.

Supply of organic soy flour in the United States

Although access to foreign supplies has contributed to growth and price stability in U.S. organic soybean markets, the fact that it has grown to represent such a large share of U.S. supplies has proven to be a crutch. defective. The first signs of weakness appeared in early 2021. On January 11 of that year, the United States Department of Agriculture announced that it would end its organic certification recognition agreement with the Indian Agriculture Authority. agricultural and processed food export development, which oversees Indian organic certification. . Then, in May, the United States International Trade Commission – in response to a petition filed by US processors of organic soybeans – issued a ruling against Indian organic soybean meal, beginning a period of investigation to determine whether countervailing or anti-dumping duties should be applied. collected. This petition ultimately resulted in the imposition of a duty rate of nearly 284% on the majority of shipments of organic soybean meal from India to the United States.

Indian organic soy flour imported from USA

This rapid unwinding of trade relations between the United States and India had a particularly significant impact on the organic soybean and soybean meal markets, as Indian organic soybean meal alone accounted for 46% of the organic supplies of United States in 2020/21. Furthermore, since the start of the 2021/22 marketing year, imports of organic soybean meal from India have contracted by 78% through April 2022, a reduction of almost 237,000 short tons. As a result, Mercaris predicts that the 2021/22 marketing year will see the first contraction in U.S. organic soybean meal supplies since Mercaris data estimates began in 2014/15.

This shrinkage has become a major concern and price risk in organic markets. As of June 2022, organic animal production in the United States has yet to report a decline in overall feed demand. As a result, interest in other protein ingredients, such as organic sunflower and rapeseed meal, has increased. Mercaris forecasts imports of organic rapeseed and sunflower meal to reach 83,000 short tons in 2021/22, a 71% increase over the previous year, with almost half of these imports coming from countries in the region. of the Black Sea.

American Organic Rapeseed and Sunflower Meals

Although the increase in imports from the Black Sea has been crucial in addressing the lack of US supply of organic soybean meal, it has again exposed US organic markets to the risks of dependence on supplies. strangers. With the February 24, 2022 invasion of Ukraine by Russia – a key organic canola and sunflower producer – access to the country has come to a halt, while the ability to ship grain out of the region has become severely restricted. While the pace of imports from the region remained strong until April, the war is raising questions about supplies, especially for next year, as organic production in Ukraine has been placed at extreme risk.

Imports of organic oilseeds and meals from Russia and the Black Sea region

Altogether, the combined impact of the events of 2021 and 2022 has been highly disruptive to the outlook for US organic soybean markets and, by extension, organic oilseeds in general. Since the start of 2021, U.S. organic soybean prices have risen from $19.37/bushel in January 2021, up nearly 110% to $40.52/bushel in May 2022, the survey found. on Mercaris market prices. Where American buyers could once rely on foreign markets to meet demand, the war abroad and the deterioration of commercial relations have put an end to this. For the foreseeable future, U.S. organic oilseed markets will likely remain plagued by these issues as U.S. crop buyers and growers seek a path to a stable supply position. What that position will look like remains unknown, as does the risk to price and availability throughout the organic supply chain.

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