Three Reasons For Lower Lentil Prices

The world has been a busy place in the last few months. Civil unrest in Tunisia, then Egypt, followed by Libya, plus significant earthquakes and an ever strengthening Canadian dollar has led to some volatile markets. It’s no secret pulse buyers all over the world have been buying hand to mouth this season, avoiding stocking up on high-priced lentils of less-than-stellar quality. Will these major events change the buying habits or ability of importers to buy? How will this impact farmers on the Prairies?

NORTH AFRICA

Disruptions of shipments into North Africa due to unrest in Tunisia, Egypt and Libya have caused delays, requiring companies to rethink delivery options. My own company had cargo sailing to Tunisia that was rerouted to Egypt, then questioned if we should reroute again. Steamship companies have suspended service to Libya. In our case, the cargo landed safely in Egypt, but trouble like this does create a reluctance to sell into that region. On the flip side, food needs are constant and demand has remained steady. In this instance the net effect to the farmer was minimal, though we have seen prices for green lentils dip in recent days in part due to exporters’ lack of confidence in these areas.

JAPAN

The death toll from the mass ive mid-March ear thquake that struck Japan sits at nearly 30,000, with the numbers rising daily. There has also been significant damage to infrastructure, from nuclear power plants to port facilities.

Some container ports were damaged, and there seems to have been a disruption not only in containers arriving but leaving Japan with exported goods. This will have widespread repercussions to all industry.

The impact of the local level has been in a reduction of container traffic coming inland to the Prairies. This reduces an exporter’s ability to competitively and efficiently move cargo, creating an additional reason for a potential reluctance to sell or at least sell aggressively. This too has likely been part of the cause for the recent softening in lentil prices.

STRONG CANADIAN DOLLAR

The Canadian dollar sat around the US$1.04 mark — a nearly three-year high, buoyed by strong oil prices and some renewed confidence in the U.S. job market, Canada’s largest trading partner.

Of course, a strong dollar is bad news for exporters. At current farmer levels, a one-cent rise in the Canadian dollar is equivalent to an approximately $10 increase in the sale price, or $0.05 to the negative on the price the farmer receives.

The higher-than-normal lentil prices reducing demand, disruptions in demand and shipping options due to civil unrest, the damaging earthquake in Japan and the continued strength in our dollar have likely combined to cause the downward slide of the green lentil price.

Since I am not a currency expert I will rely on what the experts are saying and they seem bullish on the dollar. The unrest will correct itself and won’t likely cause permanent shipping disruption. The Japanese container shipping situation will also resolve in the coming months.

It is my opinion that even with a strong dollar there is a potential for the green lentil price to increase slightly in the summer months. Should you hold out for that increase? The price for No. 2 remains in the 30s — the potential increase in my mind is one or two cents. You decide for yourself if you believe it is worthwhile to hold for the possibility of a small gain. I believe it is better to move some product when the market wants to buy rather than hold for peaks.

The last few months demonstrate how market volatility can come from some unlikely and completely unforeseen events. Marketing strategies should have enough flexibility to be opportunistic and reactive despite what the plan might have been.

JeffJacksonisexportmarketingmanager

withWigmoreFarms( www.wigmorefarms.com) basedatRegina,Sask.Haveyougota

marketingstrategyquestion?Senditto [email protected] orcall306-757-3005

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