Pulse Market Insight #159 DEC 4 2017 | Producers | Pulse Market Insights
How Much Turmoil for New-Crop Markets?
Farmers are still trying to figure out how to sell the rest of their 2017 pulse crops in the face of slow export demand and India’s import “blockade” on peas. Even while that’s going on, thoughts are turning to the 2018/19 outlook, especially planting decisions.
Next year’s outlook begins with the old-crop carryover from 2017/18 and that’s looking increasingly grim. Export projections for this year are very unclear due to market uncertainty and even more policy changes possible from the Indian government. For example, import tariffs on lentils or chickpeas are a distinct possibility. Indian farmers are responding by planting even more acres of rabi pulses and that will limit India’s import needs over the medium-term.
At this stage, it looks like Canadian farmers will be carrying over record or near-record stocks of peas and lentils into next year. Aside from the depressing impact on prices, these larger stocks will also discourage 2018 acreage simply because farmers will be hesitant to add even more pulses to large old-crop stockpiles in their bins.
In the “old days”, new-crop pulse bids would normally start to show up only in early January. In the last few years though, strong interest from exporters had moved that calendar up a few months, with fairly aggressive bids already seen in October. With the odd exception, this year’s bidding looks like it’s going to start out slowly like it did a few years ago. New-crop bidding started early for kabuli chickpeas and there’s an occasional uninspiring bid for yellow peas, but not much else.
The lack of new-crop pulse bids will delay final decision-making into early 2018, although the sharp drop in lentil and yellow pea prices has already convinced some farmers to step back from planting pulses next year. It’s still too soon to say for sure, but seeded area of peas and lentils could drop around 25% from last year. That could still change a lot, as there are contrarian marketers who “zig” when others “zag”, other farmers who stay committed to a crop rotation and still others that are prepared to grow the crop and sit on it.
One exception is kabuli chickpeas, which have seen record high old-crop prices and strong new-crop bids, at least until recently. That’s been enough to already prompt a large increase in chickpea plantings next spring. A big acreage response brings its own price risks, which need to be managed by forward pricing more aggressively.
There are also differences among the various types of pulses that could shift things around. Currently, yellow pea prices are more depressed than greens and that will tend to push more acres back into greens in 2018. There’s a decent premium for green over yellow peas right now, but that could shrink again next year. Both green and red lentil prices have been dropping, but reds are well below greens and that could shift acreage at the expense of reds.
While this article has been focused on Canadian farmers, the same price signals are showing up in other countries. Already, reports from the Black Sea region are suggesting low profitability could shift acreage out of peas. Likewise, lentil acreage in places like Australia and the US could take a hit.
Ultimately, the low prices will set the stage for a recovery in the market although, with heavy old-crop supplies, a rebound won’t happen quickly. Under “normal” growing conditions, the earliest timeframe would probably be early 2019.
Aside from pulses, there will be ripple effects on other Canadian crops. As much as two million of last year’s pulse acres will be looking for a new home in 2018 as farmers seek other alternatives. Much of that acreage will be spread out among major crops like canola and wheat, with little market impact. But there’s also a risk of overproduction in minor crops next year and farmers will need to adjust those marketing plans accordingly.
Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.