Organic Corn Prices Could Rise If Organic Cracked Corn Imports Slow

David Becker
Published: Mar 2, 2022, 20:48 GMT+00:00

Crack corn imports could face headwinds a The Black Sea becomes an issue

Organic Corn Prices Could Rise If Organic Cracked Corn Imports Slow

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The organic feed markets are experiencing elevated volatility, and there is likely to be more of it to come. The U.S. market has focused on the lack of organic soybean and soybean meal due to a perfect storm leading to a sharp decline in imports from India. Market participants could be in for another price shock that might be even more costly. Organic cracked corn imports have been a staple during the past 4-years, and many feed mills in the United States rely on organic cracked corn as their feed energy source.

Organic Cracked Corn Imports are Stable

Organic cracked corn imports have remained stable during the past 2-years, after declining as domestic organic corn production rose. In 2019, about 211K metric tons of organic cracked corn was imported into the United States. In 2020, that figure dropped to 180K metric tons. In 2021, approximately 175K metric tons of organic cracked corn entered the U.S. for organic feed consumption. The steady nature of this product has made it possible for several companies to rely on timely deliveries to run their organic feed mill businesses.

Where Does the Organic Corn Come From

The organic cracked corn is organic corn that is “cracked” in Giresun, Turkey. A survey of merchandisers conducted by Fastmarkets/the Jacobsen believes that about 70% of the cracked organic corn in Turkey is sourced from Russia and Ukraine. Not only will it be difficult as the harvest begins in about 3-months to plant organic corn, but it will also be nearly impossible to source this corn from Russia.

Transportation Insurance

Additionally, it will be challenging to procure transportation insurance out of the Black Sea area. The geopolitical environment could change, but it’s likely to be very difficult to get insurance, and if it’s possible, it will be expensive. If organic corn can make it to the United States, this added expense will likely be shared with the customer.

What Will Happen to Prices

The geopolitical events occur in an area of the world pertinent to organic feed customers. Approximately 33% of the organic soybeans that entered the United States in 2021 came from Ukraine or Russia. The organic feed market has already braced for higher organic soybean and soybean meal prices. Now the next shoe could drop. If half of the organic corn that enters Turkey from Russia or Ukraine does not arrive, nearly 60K metric tons of organic cracked corn will not make it to U.S. shores. While the past harvest in the United States was robust, it will not make up for Argentina’s weak organic corn harvest and disruption of organic cracked corn.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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