Every year has its own set of weather challenges, but 2010 has been more difficult than most, especially for those growing pulse crops. The wet weather that began and ended the season limited yields and reduced the quality of the crop. But rather than spend time looking back at a year many farmers would rather forget, this report will highlight some of the key factors that will affect pulse markets in the coming months.
Despite the crop problems, Canada still has a lot of peas to move out in 2010-11. When the 2.8 million tonnes grown in 2010 are added to the record volumes carried over from the 2009 crop, total pea supplies this year are actually quite comfortable.
Canadian pea exports have been going like gangbusters so far this fall, running at a record pace through the first 3-1/2 months of the crop year. These heavy exports will help take Canadian ending stocks from last year’s record, down to fairly snug levels in 2010-11. Yellow peas have accounted for the lion’s share of exports and the key destination has been South Asia, particularly India, Bangladesh and Pakistan. Green peas have been going to a wider array of countries; China and India have been the two biggest customers.
Because this part of the world is so important for Canadian exports, it’s worth looking at the situation in South and East Asia. The demand from China for both yellow and green peas has been increasing in size and is fairly consistent, meaning more growth is likely. The flooding in Pakistan has reduced its own pulse production and demand will remain steady for Canadian yellow peas, as well as red lentils.
The big event looming over pulse markets however is the upcoming winter crop in India and its potential to put a real damper on Canadian exports. Just to put it in perspective, Indian farmers planted 36 million acres of pulses last winter; this year acreage is widely expected to take a sizable jump. The Indian government recently announced a large increase in its minimum support price, and farmers there are reported to be responding to the higher floor price as they plant the crop. What is also worrisome (from a Canadian standpoint) is that moisture conditions, usually the main limitation for Indian pulse crops, are looking quite good now that the crop is being planted.
A large Indian crop would reduce Canadian export prospects of peas (especially yellows) and other pulses, and the effect would likely start to show up as early as mid-January. For farmers here who haven’t sold much of their peas yet, this cloud on the horizon is a signal to be selling into the current rally. The Indian crop is still just in the planting stage and a lot can happen yet, but it is a clear market risk that can be managed by making incremental sales. Because of its significance, the progress and condition of the Indian winter pulse crop needs to be carefully monitored.
The outlook for green peas is more positive than for yellows, largely because the weather damage has limited supplies of edible quality greens and kept that market on edge. It also doesn’t hurt that the USDA recently knocked 100,000 acres off its estimate of the U.S. pea crop, which is more heavily weighted toward green types. The other positive aspect is that global demand for green peas is much more dispersed than yellows and is less vulnerable to changes in a single region of the world.
The lentil situation is similar in many ways to the pea market. A huge Canadian crop was anticipated which depressed prices early on, but the lousy weather reduced both the size and the quality of the crop, forcing prices higher. Those prices appear to have levelled off, at least for the time being, now that the market has come to grips with the condition of the crop.
Really, the lentil market has split into two parts — red and green — and the outlook is fairly distinct for each part. The green lentil outlook is dominated by the damage to the Canadian crop. Because green lentils are more frequently consumed as whole seed, visible characteristics are far more important and physical damage is much more critical. The wet conditions this fall severely limited the volumes of good-looking green lentils and this has been keeping the market on edge.
The price gains have been impressive, especially for large greens, but are being capped by a massive jump in the U.S. lentil (mostly small and medium green) crop. Looking ahead, the green market should hold fairly steady with limited downside simply because there aren’t any sizable green lentil crops in other parts of the world until next fall. This tightness will also support new crop bids once they start showing up in the new year.
Red lentils are facing a slightly different picture. Yes, lower quality does reduce processing efficiency but since most of the crop is hulled and/or split, the “looks” of the seed coat are less critical. That means supplies of edible red lentils weren’t reduced to the same extent as greens.
Exports of red lentils have really picked up since the harvest with much of the crop heading into South Asia. As a result, the crop outlook in India (described in the pea section) will keep red lentil prices under some pressure. In addition, there will be other red lentil harvests — notably Australia, India, Turkey and Syria — prior to the next Canadian crop which will add to global supplies. As a result, the red lentil outlook isn’t quite as rosy as for green lentils, and current prices reflect that situation. Going into the spring, red lentil bids will have a hard time rallying unless there is a production problem with one of these other lentil crops, especially in Turkey or India.
ChuckPenneristhefounderofLeftField CommodityResearch,anewventureproviding marketanalysisandeconomicresearch servicesforCanadianfieldcropmarkets.He canbereachedthroughtheLeftFieldweb-site at www.leftfieldcr.com