High commodity prices may eat into organic acreage

After two years of double-digit growth, organic soybean production is expected to fall amid pressure from high prices for conventional crops.

many Soybean background in the big garden
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Organic soybean production is expected to fall this year amid pressure from higher prices for conventional crops.

Conventional and organic soybeans have seen acreage soar in recent years as crop producers chase rising prices. But this year, organic soybeans may not keep pace with their conventional counterparts.

Based on seed sales, U.S. organic soybean planting is set to decline about 15% this year, according to Ryan Koory, vice president of economics at Mercaris, a market intelligence firm covering the organics sector. This comes after a 23% increase in organic oilseed production in 2022, which saw organic soybeans alone grow by more than 74,000 acres.

“One of the things that you have to keep in mind whenever you think about such a strong increase in organic acreage, is that some of that acreage gain was in and of itself not sustainable,” Koory said. Organic production requires crop rotation, he said, and some farms had already tried to cut corners on crop rotations in 2021 to capitalize on soaring soybean prices.

But crop rotation isn’t the only reason why organic soybean production is likely to decline this year, Koory said. One of the biggest factors behind surge in production in 2021 and 2022 — the deterioration of the U.S. trade relations with India — is now on its way toward stabilization.

Before the U.S. ended an equivalency agreement recognizing India’s organic certification programs, India was one of the largest suppliers of organic soybeans to the U.S. The loss of that agreement pushed organic soybean prices as high as US$45 per bushel.

Since then, prices have settled into the range of US$20-25 per bushel, with new organic suppliers emerging in Africa, Russia and the Black Sea region, Koory said. And as competition has emerged from new markets overseas, organic feed markets in the U.S. have begun to return to a more normal paradigm in which the majority of soybeans are imported.

With prices en route to a new normal, much of the organic acreage that was dedicated to soybeans in the past two years will likely return to the crops it came from — organic wheat and organic corn. However, Koory said there’s a good chance some of that acreage will also convert back to producing conventional crops on account of the slim margin that exists between organic and conventional soybean prices.

Demand for biofuels has played a key role in influencing this price differential — or lack thereof. Premium markets for organic soybean oil are limited, which means most organic soybean oil is sold into conventional markets anyway. That means organic farmers largely look to feed and human food uses of soybeans to make up for the higher cost of organic production — and if the difference isn’t large enough, they may be tempted to leave organic production altogether.

Consumer demand for organic products also seems to be slowing in the wake of the economic downturn, Koory said. While signs of the slowdown have yet to show up in market data, he said he’s heard reports from organic dairy and organic poultry producers that they plan to reduce production this year in light of higher input costs that they’re unable to pass on to consumers.

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