Pulse Market Insight #140 JAN 3 2017 | Producers | Pulse Market Insights
What’s Happening with India Crops?
Everyone who’s got old-crop pulses left to sell or is thinking about growing pulses in 2017 should be closely watching what’s going on in India. The rabi (winter) growing season is now well underway and the outcomes will have a large impact on demand for (and prices of) Canadian pulses for the rest of the 2016/17 marketing year and the first half of the following season. The rabi growing season is when Indian farmers plant chickpeas, peas and lentils, crops that have the most direct impact on our Canadian markets.
The rabi planting season starts in late October and is in its very late stages by now. This year, Indian farmers have been encouraged by good planting conditions, increased minimum support prices and strong market prices. As a result, planting is running ahead of normal and above-average pulse acreage is pretty much assured.
Compared to the 5-year average, seeded area of total pulses is up 8%, but the increases are larger for some crops of particular interest. Chickpeas are the dominant pulse crop and the 22 million acres already planted is 7% above the average. Lentil acreage is 13% above the 5-year average and 16% more peas have been planted than the average.
This acreage provides the potential for a sharp improvement in the 2016/17 Indian pulse crop, on top of a larger kharif (summer) pulse crop that’s just been harvested. On its own, the acreage is a solidly bearish market signal and raises the risk of a drop in Indian and, by extension, Canadian pulse prices.
Of course, getting acres in the ground is only the first step in producing a crop; the weather has to cooperate as well. The rabi season opened with solid rains to provide the initial soil moisture for getting the crop underway. The problem is that since then, rainfall has been sparse to nonexistent. The map below shows the areas of surplus (blue), normal (green), deficient (red) and scanty (yellow) rainfall since the beginning of October until late December. Wide areas of India have received less than normal rainfall.
It’s important to remember, though, that the rabi season is the driest part of the year in India. In Madhya Pradesh (one of the main pulse producing states) for example, deficient rainfall means 35 mm of actual rain versus 52 mm on average. So the shortfall isn’t all that much yet, but more rain will be needed. One of the other key factors is the temperature during the growing season, which determines how much moisture is needed to keep the crop growing.
The reason why this particular rabi season is especially important is that India has come off two years of very disappointing crops which have been the driver of historically high (and in some case record) pulse prices. With tight supplies and strong prices, there’s potential for the market to move sharply in either direction. If there is a problem with the Indian crop, prices will turn strongly higher again, but a favourable crop could take the air out of the market in a big way. That’s already been happening to some degree, but most pulse prices are still running well above the long-term average.
The bottom line is that the Indian rabi crop has the potential to be very large, but it will need conditions to improve soon for it to reach that potential. So far, satellite vegetation maps show the moisture deficiencies aren’t a large problem yet. But to make good marketing decisions for last year’s and next year’s crop, it’s important to keep monitoring the rainfall situation.
Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.