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What a Year it Was for Organic Grains; 2021 Year in Review

By:
David Becker

Organic soybean prices have nearly doubled year over year

What a Year it Was for Organic Grains; 2021 Year in Review

In this article:

The twists and turns of organic grain prices were extraordinary in 2021. While organic corn prices saw sizeable gains, organic soybeans and byproducts made the headlines. It would be hard to write a script that mirrored reality.

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.

As the world prepared for a return from COVID, no one could have expected what had unfolded. 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.

The Perfect Storm

The perfect storm was needed to drive prices to these levels. Recall, earlier this year, after complaints from the EU, APEDA decided to crack down on the most significant Indian certification companies, OneCert and Lacon.

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 an Issue

Inflation has sprouted in most industries, and transportation has been a significant culprit. 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.

The straw that broke the camel’s back was the Department of Commerce’s decision to impose a CVD and antidumping (AD) duty on several Indian companies. The CVD duty is a punishment on companies that received a subsidy from the Indian government, which helps them sell a product at attractive levels. The AD duty was imposed to punish those selling organic soybean meal in the U.S. at rates below where U.S. crushers could sell them and generate a profit.

The Bottom Line

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.

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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