Guest Post: What to Know About Imports’ Impact on Commodities and Organic Grain Prices
Conventional corn and soybean prices are on the rise. While organic soybean prices are strong, organic corn isn’t rising at the same pace. What gives?
David Becker says the difference in organic prices isn’t because of commodities. It’s due to basic supply and demand, particularly the supply of imports.
David is an analyst at The Jacobsen, a Fastmarkets price reporting agency and publishing company that specializes in opaque markets like organics. Here he shares his insights on the organic market and the factors that impact it.
Why organic soybean prices are on the rise
The biggest factor on organic soybean prices is imports. Particularly those from India, our biggest contributor of organic soybean and soybean meal.
Imports from India this year are down for several reasons. Shipping prices have skyrocketed due to COVID.
The European Union rejected a number of shipments over certification issues, which the U.S. also responded to.
Then, U.S. organic soybean meal processors filed an anti-dumping lawsuit against the country.
So with a big decrease in supply, prices for domestic organic soybeans keep climbing. The Jacobsen reported that prices hit $35 per bushel in the Midwest in May.
Commodities’ indirect influence on organics
So how do commodity prices impact organics? According to David, it’s an indirect effect.
What happens is when conventional prices in the U.S. rise, they rise globally. That makes conventional crops in countries we import from more competitive to organic.
So farmers in places like Argentina and Ukraine may decide to grow conventional instead of organic. That leads to fewer organic imports, causing domestic organic prices to increase.
U.S. farmers do this, too. If the gap between conventional and organic crop prices is small enough, organic growers may decide to grow conventional over organic.
As long as demand continues to rise, it’ll eventually lift organic prices. But David notes this usually takes a cycle or two.
Watch the Federal Reserve
The high prices for conventional and organic crops all depend on the economy, David says. Which is why he advises farmers to pay attention to the Federal Reserve.
He explains when the Federal Reserve starts raising rates and the fiscal stimulus slows, that’s when we’ll see prices fall.
“The good times are predicated on what’s going on in our economy and the Federal Reserve and their monetary policy stimulus,” he says.
“And when that ends and the music stops, you should quickly look for a chair and sit down.”
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