Prior to the spring seeding season, farmers who wanted to get 2012 – 2013 levels of soybean pricing on their 2014 production had to take a serious look at Identity Preserved, or generic non-GMO soybeans. This decision by producers to aim towards the premium soybean market has resulted in a massive increase in the supply of non-GMO soybeans, but the demand has actually slipped lower with more of the world’s markets moving to accept genetically modified soybeans. The 2014 world-wide soybean production will be a record crop, and in a well supplied market the premium sales fill up first.
The “non-GMO” soybean market is a catchall for a wide variety of beans which are the result of several different production situations. The majority of the supply is those soybeans which were deliberately grown for the non-GMO market, but in years like 2014’s wet spring there are additional acres of productions due to growers putting in a few extra acres of bin run soybeans on late planting decision. The other source of supply is that the non-GMO market is an outlet for Identity Preserved soybeans which due to green tints, mud tagging, commercial drying or other quality issues defaulted into the non-GMO supply.
Confounding the increased supply of non-GMO soybeans is the diminishing demand due to a major bankruptcy of a non-GMO importer in Europe and the increasing acceptance and regulatory approval of genetically modified soybeans in the European Union countries. Asian non-GMO soybean demand is level, but farmers in Ontario were not the only soybean growers in the world who opted for an increase in non-GMO acres in order to offset the lower cash price of soybeans. 2014 will produce the largest soybean crop in history, and in such times of significant supply, the premium price markets fill up first.
There will be soybeans produced in this market which qualified for premiums based on production practices and quality which end up in the no premium crush market simply due to marketing errors by the producer. There is no gain to be made holding out on a market which is grotesquely over supply, and the non-GMO soybean demand is clearly over supplied this year. The demand for non-GMOs is finite. Once the buyers who require a non-GMO have filled their requirements, the market is filled, and the premiums disappear. The farmer’s ability to catch a premium on this type of soybean in this marketing year is going to be to lock in the premium before the demand is entirely fulfilled. A seller can make any sort of decision that they would like to make with regards to when they price the CBOT futures portion on their non-GMO beans, but if they don’t book their ticket on the premium train, they will still be standing on the platform when the non-GMO train leaves the station. If the October weather gets messy and many of the Identity Preserved soybeans get downgraded, the remaining seats on the non-GMO train will fill up very quickly.
There are times to be patient with marketing decisions, and for some commodities, this is one of those times, but in the case of locking in premiums for soybeans the time to act is now.