U.S. organic corn and soybean production expands significantly
Markets have turned decidedly bullish for all three major organic crops since September 2021 as supply outlooks have become increasingly uncertain. Despite all prices moving generally higher, the ability of these markets to maintain their current price levels will hinge on a variety of factors over the next year as discussed in the April 2022 Mercaris Commodity Outlook.
“A major element shaping the global agricultural outlook—as well as U.S. organic markets—is the ongoing incursion of Russian military forces into Ukraine. In addition to impacting grain, fuel and fertilizer prices globally, this situation has created a tremendous amount of risk for U.S. organic corn and oilseed imports throughout the next year,” says Ryan Koory, Vice President of Economics with Mercaris. “Throughout the previous year, Russia and Ukraine jointly accounted for 18 percent of U.S imported organic oilseeds and their derivatives. In addition to the Ukrainian-Russian conflict, Argentina and Canada’s drought conditions could provide further restrictions on U.S. imports.”
Over 2020 and through 2021, Argentina accounted for 15% of U.S imported organic oilseeds and their derivatives as well as 69% of U.S. organic corn imports. In Canada, the drought risk mostly impacts organic wheat supplies as persistent drought conditions are primarily located across the prairies. According to the Canadian Drought Monitor, 90% of agricultural land across the Canadian prairies was identified as experiencing drought conditions as of February 28, 2022. Persistent drought conditions extend into the U.S. with 87% of Montana—the largest organic wheat producing state—under drought conditions as of March 29, 2022, according to U.S. Drought Monitor data. If these conditions persist, 2022 is set to become the second consecutive year of reduced organic wheat production as a result.
“In contrast to wheat, both organic corn and soybean production have expanded significantly. Mercaris estimates that organic corn and soybean production increased 9 percent and 25 percent from the prior year respectively over the 2021 harvest,” says Koory. “Despite the risk to imports, gains in U.S. organic corn production are expected to push total U.S supplies higher. This is partly due to organic feed demand slowing over 2021/2022, as higher organic feed prices trim industry expansion.”
Although corn production might be up, Mercaris estimates U.S. organic corn feed demand will increase by only 3% over 2021/2022. Organic corn for food use and residual on the other hand is expected to increase by 36%.
“With the growth in supplies projected to outpace growth in feed demand, Mercaris estimates U.S. organic corn supplies for food use and residual will gain 36 percent year/year. However, with the risks to U.S. organic corn imports, the remainder of 2021 through 2022 could see this number move either much higher or much lower,” says Koory. “Further increases in Mercaris food use and residual estimates would likely result in bearish market pressure by the 2022 harvest. However, a significant reduction in the import outlook could just as easily provide the market with persistent bullish price support by Fall 2022.”
In contrast, organic soybean supplies are expected to contract over 2021 and through 2022 as the industry adjusts to the loss of large organic soybean meal imports from India. Mercaris estimates U.S. organic soybean meal feed demand will decline 3% over 2021/2022 as organic livestock producers work to incorporate other organic protein sources into feed rations. Organic soybeans for food use and residual are expected to fall 29% year/year.
“In total, the U.S. organic soybean supply outlook is generally bullish for the remainder of 2021/2022 MY, with the high possibility of remaining bullish well into 2022/2023 MY,” says Koory. “Supply will be the main factor driving prices over the next year, with a large increase in both U.S. production and imports needed to bring relief to U.S. organic soy supplies and prices.”
The information above is summarized from the April 2022 Mercaris Commodity Outlook. To find more details and information on other organic and non-GMO markets, visit www.mercaris.com.