Organic Grain Long-term Volume Contracts Might Drive Hedging

Organic Grain Long-term Volume Contracts Might Drive Hedging

Indian soybean prices are rising. The NCDEX board prices are at a February delivery contract high. The Rupee is strengthening versus the dollar, which has pushed the Indian soybean price in dollars per metric ton above $660, FOB India, which is more than a 5-year high. With freight rates from India remaining elevated, prices delivered to Baltimore will likely continue to trend higher. Exporters tell The Jacobsen that shipping from Nhava Sheva to Baltimore for organic soybean and organic soybean meal is approximately $3,800 per FCL, which puts the cost at $180-$185 per metric ton.

Demand for organic soybean and soybean meal remains elevated. It’s challenging to find domestically crush organic soybean meal crushed with organic soybean grown in the United States. Approximately 70% of the organic soybean/meal consumed for feed in the U.S. is imported. To help mitigate the lack of domestically grown U.S. grains, The Rodale Institute has enlisted Cargill to increase organic farmland. According to a Press Release from Bell and Evans, who Cargill supplies organic grains, Bell & Evans will finance the transition of 50,000 U.S. acres to certified organic over 5-years.

How the Organic Grain Initiative Will Work

Cargill will actively recruit farmers who are interested in transitioning to organic. The press release states that farmers must be located in Illinois, Indiana, Michigan, Ohio, or Pennsylvania and have at least 150 acres available to transition. Once the farmer signs up, Rodale Institute will be on hand to help with organic system planning, certification assistance, weed management guidance, crop rotation planning, and other work to address the technical challenges involved in switching from a conventional to an organic system. Additionally, farmers will also be given a two- to five-year contract guaranteeing a buyer for the organic grain. That increase in organic supply will help Bell & Evans continue to expand.

Hedging Exposure

The Jacobsen would not be surprised if other groups also started to guarantee contracts on organic corn and organic soybean volumes. They can now lock in their prices using call and put options on The Jacobsen organic corn and organic soybean prices series. By purchasing a call option using Stableprice.com, a company like Cargill could purchase future harvests and lock in prices eliminating market risk.

 

Blog

02.26.2021

Soybean Oil Prices Rally Despite Decline in Soybean Futures

Soybean Oil Prices Rally Despite Decline in Soybean Futures

Soybean Oil Prices Rally Despite Decline in Soybean Futures

Vegetable oil prices were mixed on Friday as fund spreading lifted the front-end of the soybean oil...

02.26.2021

Grains End Week Higher Despite Two-Day Slide

Grains End Week Higher Despite Two-Day Slide

 

Weekly Soybean and Corn Prices Hold Close to Near-Term Highs

Grain prices finished the week stronger despite Thursday's sell off. Grain prices had limited follow through allow weekly prices remain...

02.26.2021

CBD Markets

CBD Markets

Market projections for CBD have stated that the current market is anywhere from $2-4 billion globally, and expected to grow at double digit CAGR.  Early projections by firms showed that...

Latest Tweets

We are excited to announce that we have acquired @thejake1865, expanding and strengthening our agriculture business and bringing new insights and capabilities to our customers. ... Learn more: http://spr.ly/6019HddQb

#FastmarketsAgriculture #agriculture #acquisition

Join us at our first virtual Hemp Conference looking at Hemp Fiber, Flower and CBD - https://thejacobsen.com/events/hemp-conference #hemp #cbd #cbg #industrialhemp

Load More...