Pulse Market Insight #156 OCT 10 2017 | Producers | Pulse Market Insights
What’s Happening in Lentil Markets?
Normally, lentil exports are hopping at this time of year. In the past couple of years, farmers had forward sold a big portion of the harvest and South Asian buyers had pre-bought larger volumes. Those two actions combined very well to move a whole lot of lentils in a short period of time. Even with last year’s difficult harvest, 300,000 tonnes were exported in September and by the end of December, 1.4 million tonnes had been shipped out.
This year is starting off very differently. Farmers don’t have quite as many lentils to sell but the crop came off earlier and in much better shape. StatsCan’s initial production estimate has already been revised higher and I expect the crop will end up even larger at 2.7-2.8 million tonnes. That’s 500,000 tonnes less than last year but is still the second biggest crop on record.
Based on an earlier acreage breakdown by StatsCan, 2017 production of red lentils could be down by nearly a quarter from last year but the green lentil portion of the crop could end up almost 10% larger than 2016. That difference between the two types is actually positive because demand for red lentils looks like it’s softer than for greens.
Demand for Canadian red lentils is concentrated in India and Turkey and prices there continue to weaken. That’s largely because in contrast to the last two years, old-crop domestic and imported supplies are still quite comfortable and are more than enough to meet current demand. This means there won’t be a big surge in purchases of new-crop Canadian red lentils, at least in the short-term.
For green lentils, old-crop supplies had been very tight and importers had purchased more aggressively early in 2017/18. But with a larger good quality Canadian crop and sizable US supplies, that initial flurry of activity has faded.
This quieter export activity for both reds and greens is reflected in Canadian bids. The softer demand for red lentils has been apparent for several months and that’s led to a gradual decline in bids, down 2 cents per pound since early August and now closing in on 20 cents per pound at a number of buyers.
Green lentil bids, especially for large varieties had remained steady throughout the summer but now that harvest is over and the initial wave of purchases is over, have turned lower as well. Since the beginning of September, bids for the various classes are down 3-4 cents per pound.
For all major classes, the momentum is lower, but bids for red lentils could level off around 20 cents if farmers decide that’s their floor price and lock the bins at those levels. With green lentil bids still at profitable levels, selling may not slow down too much, meaning there’s more possible downside. The outcome of India’s pigeon pea harvest, just starting now, still has the potential to provide some support for imported green lentils as a substitute, but won’t trigger a full-scale rally either.
If there is any room for optimism on red lentils, it would need to come from India. As mentioned earlier, lentil supplies there are still comfortable and should be almost enough to carry them through to the winter (rabi) harvest in February. If that crop is threatened, it could spur more imports and give red lentil markets a (modest) boost. There are a couple of possible negative signs for the rabi crop, but since it hasn’t even been planted yet, it’s far too early to pin a lot of hopes on an Indian crop failure.
Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.