Temporary Slaughterhouse Closures Still Weigh on Organic Corn Demand

Organic corn prices remain soft and continue to feel the impact of higher imports and temporary loss of demand during April and early May. While demand has rebounded, the softness came just as imports surged creating an overhang that has yet to be worked off.

Organic chicken slaughter by weight has rebounded back to the levels that are consistent with this time of year. The 4-week moving average of organic chicken slaughter by weight has surged higher following a drop in April due to the closures of several slaughterhouses throughout the United States. In mid-April, there were three slaughterhouses in Pennsylvania alone that were closed due to the spread of COVID-19. Three months later, nearly all the slaughterhouses in the US are open or partially open.

The decline in organic chicken slaughter during April and early May led to a temporary halt in organic feed demand. While this has rebounded, it has yet to accelerated to catch up to retail sales demand for organic chicken. Mid-west merchandisers are saying that there is a plethora of supply on the interior of the US and they are looking for the coasts to increase demand and ship from the interior out to the coasts. Organic chicken slaughter by weight is down slightly more than 2% year over year for the first 28-weeks of 2020 compared to the same period in 2019.

While demand has been steady, the real catalyst for the decline in organic corn prices and other organic prices has been the volume of supply. Organic whole corn imports are projected to rise 35% year over year for the 2019/2020 season according to The Jacobsen. This compares to organic cracked corn imports which are forecast to decline approximately 3% year over year for the 2019/2020 season. Organic soybean imports are projected to decline by 12% year over year. Most of the increase in organic whole corn imports came from Argentina. One benefit of lower US domestic organic corn prices is that imports have become less competitive. This should reduce imports of organic whole corn during the 2020/2021 season allowing organic corn prices to stabilized and eventually grind higher.