In many ways 2020 is a year of unexpected and permanent change. Not to be the exception, the U.S. organic industry may well look back at 2020 as the point where organic matured past its niche beginnings, becoming a global commodity market. With this transition organic prices have left behind the relative stability of the past five years, beginning a new phase in which understanding the market’s supply and demand factors is critical.
The divergence of U.S. organic corn and soybean prices over the past year provides striking evidence. Over September 2020, organic feed-grade corn delivered to U.S. Corn Belt grain elevators averaged $6.80 per bushel (bu), down nearly $2.50/bu year over year (y/y). Furthermore, Corn Belt delivered organic feed-grade corn prices have held persistently below $7.00 since June of this year, marking their lowest level since prices collapsed in 2009 following the global recession. By contrast, organic feed-grade soybeans have fared quite well, with delivered prices to Corn Belt grain elevators averaging $20.20/bu over September 2020, up about $0.20/bu y/y.
Organic corn and organic soybean prices are diverging. While demand, which is driven by animal feed needs, is expected to remain stable during the balance of 2020, the supply of organic soybeans is expected to decline due to slowing imports. Organic corn imports are expected to rise during the current harvest season which should continue to weigh on organic corn prices. During the 2018/2019 harvest season, organic soybean imports were replaced with organic soybean meal imports, reducing the volume of organic soybeans that made their way to US shores which generated tailwinds for organic soybeans and organic soybean oil prices.
US domestic organic corn production was nearly unchanged year over year for the 2019/2020 season at 62-million bushels. The Jacobsen expects that imports of organic whole corn and organic cracked corn will rise during the balance of the 2019/2020 season by approximately 8% climbing to 16.2 million bushels. With demand expected to remain unchanged year over year, the stock to use ratio is expected to climb generating headwinds for organic corn prices. For the 2019/2020 season, The Jacobsen sees organic corn prices that are picked up at the farm in the mid-west averaging $8.3 down from $8.60 seen during the 2018/2019 harvest season.
Organic corn prices have rallied more than 33% to $8 per bushel. The bearish scenario seemed to fizzle out as prices reached $6 per bushel. Fortunately for organic corn farmers, the conventional market started to percolate and gave them confidence to store organic corn in bins as opposed to dumping their production on the market in the fall. While there might be domestic corn available, imported organic corn that comes to the U.S. during the 2020/2021 season should decline year over year.
During 2020, approximately 143,000 tons of organic yellow corn made its way to the U.S. from Argentina. This was up 27% year over year. In 2019, 113,000 tons of organic yellow corn came to the U.S. from Argentina up approximately 29% year over year. The combination of the drought experienced in Argentina and strong conventional prices will reduce this number during the 2021 calendar year.
Prices of Organic Corn
$190.00-$290.00/ Metric Ton