You know that sound — the satisfying noise made when you open an ice cold bottle of your favourite beverage. It’s almost as if the beer is saying, “Finally!” and you enjoy liberating that beverage after a hard day’s work. For many it’s the reward of a job well done. To farmers, I believe harvest has some similar sounds — the combine churning into the first ripe field; hearing the chugs of the auger as you unload the initial trucks; the very first splash of newly harvested grain into an empty bin. All these sounds mean that yes, harvest is finally here. The question is how well will you be rewarded this season?
Since April, I’ve discussed the actual seeded acreage with farmers and marketers alike. The answers have been varied and difficult to assess especially due to many acres being lost to flooding. After considering what was seeded, then affected by flooding and many discussions with people from all corners of the province I have settled at 1.7 million acres of lentils for 2011. It seems reasonable to gage a 55/45 split, tipping slightly in the favour of red lentils, the balance green (all inclusive of laird, richlea and eston types). This will generate production of somewhere in the neighborhood of 400,000 MT of reds and 350,000 plus MT of greens.
As I see it, green lentil buyers around the world are not overstocked with green lentils. Due to high prices and mediocre quality, buyers have spent the last year buying hand to mouth. If you are a green lentil grower and have grown good quality No. 1 or No. 2 lentils it is a safe bet that somewhere someone is looking for green lentils and they likely want to buy right now but, they are waiting. For what? For you to sell. Will you?
Marketing red lentils requires a different tactic. The other significant red lentil growing regions have seen much better production this season than in the last few. Canada sits on a large carryover; Australia has carry over too; and, there is a seeming abundance of red lentils everywhere. No one in the world seems eager to buy red lentils today at least not at the values you have become used to.
STRATEGY FOR LATE 2011
As always, a farmer needs to evaluate their production against current market values and the potential for increase in value verses the potential for decrease in value. Should you find yourself in need of cash or storage space you will of course need to sell some product, but what should you sell and what should you hold for potential gains?
This discussion will need to be evaluated against canola, flax, mustard or other crops you have and the potential upsides they may have. For now we will simply discuss lentil markets.
I believe it is likely we will see demand come for green lentils first. I also believe there is room for upside to the lentil value especially if you hold No. 1 or so called X2 lairds. As of late August, the No. 1/ X2 market sits at about 33 cents. Reasonably speaking, will we have produced more of this quality than we did last year? Certainly harvest conditions were better, but acres were down. At the end of the day I believe we will have produced more than last year, but it is still early as I write, so it’s a tough call. I will remind you that last season most farmers received 36 cents or higher for this quality. My suggestion is that you will again if you resist selling at the first sign of demand. Yes, you should sell into the market during periods of demand but why accept the first offer? Keep buyers coming back until you have gained close to that 36 cent mark. As for No. 2 lairds, again it is early, and we have seen plenty of No. 2 quality. The downside to this could be a larger gap than the usually seen two cents between No. 1 and No. 2.
Large volume lentil exporters are eager and hungry for business today and could be offering low to generate sales and in doing so might be keeping the market from realizing its potential. Why sell at levels much lower than last year when you have harvested fewer tons? We are talking about green lentils, there are really no other growing regions to turn to. Of course you must sell when you feel it is right for you. I believe it is reasonable to look for 31 to 32 cents and sell into demand when it comes at this level.
Red lentils I address with a bit more reserve. The current market for reds bears in the 20-cent range. As noted earlier, there seems to be more than enough supply. The world will need to chew through, no pun intended, the supply of reds before we see some significant movement in the price level here. I believe the potential exists for the price to move up in the early part of spring possibly to the mid 20s level but that is a ways off yet. Some are suggestion holding reds for this run and selling greens, obviously my opinion differs. Canada is the source of greens there are many other options when it comes to reds. I beleive we are likely looking at a sluggish year for the red market as things stand today.
What do you take away? If I was a farmer and needed to generate cash today I am certainly much more inclined to sell yellow peas or canola and hold lentils. If I must sell lentils then I would move reds at current levels and hold greens. As things unfold more clearly with harvest how much to hold or sell and for how long to hold or how fast to sell will become more clear.
JeffJacksonismarketingmanager,pulsesfor ScoularCanadabasedatCalgary,Alta.Have yougotamarketingstrategyquestions?Send themto [email protected] Theopinions abovereflectthewriter’sandarenotnecessarily theopinionofScoularCanada