Pulse Market Insight #154 SEP 11 2017 | Producers | Pulse Market Insights
What’s New from StatsCan?
In the past two weeks, StatsCan has issued a couple of its most important reports of the year. Even those who claim that they don’t care about government reports or who criticize the numbers were still watching fairly closely. On August 31, StatsCan issued the results of its first 2017 yield and production survey of farmers and on September 6, it released estimates of old-crop inventories held commercially and on farms.
For peas, the 2017 yield and production estimate was pretty close to expectations. The crop was pegged at 3.8 million tonnes, just slightly below the average trade guess. The prairie-wide yield was set at 34.4 bu/acre, about 3 bushels less than the 5-year average. This crop number seems fairly reasonable, as it generally agrees with yield estimates from both Alberta Ag and Saskatchewan Ag crop reports. It’s possible the final yield number could increase slightly as the harvest moves further north, but it’s unlikely to change much.
StatsCan’s estimate of July 31 pea stocks came in at 300,000 tonnes, again close to expectations. It’s also very close to the 5-year average of 325,000 tonnes. This means the carryover into the 2017/18 marketing year isn’t either heavy or light.
The combination of a fairly average 2017 crop and old-crop inventories means the 2017/18 outlook for peas is relatively well-balanced. From this stage on, demand factors will have more influence on price direction than supply issues. So far, demand from key buyers in India and China has been steady but unspectacular, which is allowing prices to move mostly sideways.
StatsCan’s estimate of the 2017 lentil crop of 2.3 million tonnes was smaller than most people expected. It’s not that StatsCan was wrong, it’s just a matter of timing. Back when the survey was conducted in late July, farmers were expecting lower yields. The StatsCan yield came back at 1,165 pounds per acre, the lowest in at least 10 years and even below last year’s disastrous results. Once combining got started though, fairly consistent comments came back that yields are better than expected. This is confirmed by last week’s Sask Ag yield estimates. A more likely crop estimate is in the 2.6-2.8 million tonne ballpark.
While the StatsCan production number came in on the low side, its estimate of July 31 stocks were higher than expected at 405,000 tonnes, although most of those old-crop inventories are likely lower quality lentils.
If the 2017 crop is actually larger than StatsCan’s estimate and the carryover is that high, it will mean fairly comfortable supplies for 2017/18. Demand has been quiet in the marketing year, more so for red lentils with stronger interest in greens. That’s why prices, especially for reds, haven’t reacted to the lowish StatsCan production number.
Even though the StatsCan production and stocks reports are important as checkpoints, the impact on prices is modest. Market prices are determined by actual supply and demand dynamics, not by government estimates. The interaction between how many peas or lentils that sellers (farmers) are willing to unload and how much is needed by overseas buyers is the real market driver. The estimates from StatsCan simply serve to confirm those ideas or muddy the waters slightly, but the market action simply keeps rolling on.
Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.