Mercaris Murmurings: U.S. organic soybean imports build, soybean meal imports drop

U.S. organic soybean imports continued to build over April, exceeding 36,000 MT, or the largest import volume since July of 2021. Organic soybean imports were supported over April by another month of elevated imports from India—reaching 6,000 MT—as well as the third-consecutive month of elevated imports from the Black Sea region—reaching 25,000 MT. In contrast to organic soybeans, imports of organic soybean meal remained reduced over April at less than 12,000 MT, or their lowest level for the month since 2018. In somewhat of a departure from recent months, April’s organic soybean meal imports were largely sourced from India, with import from the country exceeding 10,000 MT for the first time in seven months. However, imports from India were lower over April compared to historical values, with imports over the month down 47% from the same month in 2021.

Although import volumes showed a slight improvement over April, prices have resume modest upward pressure. Over the two-week period ending May 14, 2022 prices for organic feed-grade soybeans delivered to U.S. Corn Belt elevators averaged $40.37 per bushel, up more than $1.00 per bushel from the start of the prior month. As of May 2022, the spot market for organic soybeans has become very tight in the U.S. This situation is due in large part to constricted U.S. supply. However, current price levels appear to be creating their own constraints on the market. In conversations organic market stakeholders, it has been anecdotally confirmed that throughout the supply chain many operations have adopted a hand-to-mouth supply management strategy as a form of protection against market price volatility. With much of the industry focused on locking in short-term needs, and at reduced volumes, overall contracting activity within the market has slowed over the second quarter of the year, resulting in reduced supply liquidity.

The reduction in liquidity appears to be extended into new-crop contracting as well, and for much of the same reason. Over May, contracts for new-crop delivered organic soybeans are being bid, and executed at a discount to spot markets as purchasers seek protection from potentially bearish market pressure this fall when the U.S is likely to experience a record organic soybean harvest, and seasonally escalating imports from Argentina. However, this discount appears to be limiting producer interest in securing new crop contracts given elevated spot market prices, as well as bullish price risk stemming from the on-going threat of Indian and Black Sea trade disruptions.

In total, as planting proceeds this spring, all sides appear to be sizing up future supply risks. While many factors suggest U.S. harvested acres will grow substantially this fall, imports will ultimately remain the deciding factor for U.S. supplies over the next year. Unfortunately for all though, imports will also remain the most uncertain.