Waiting Out the Seasonals

Crop prices tend to behave in certain ways at certain times of the year. That makes sense since crop production happens at specific times of the year and supply levels change according to those seasons. The seasons affect both farmers’ selling behaviour and buyers’ activity. No surprise there.

Seasonal price tendencies are often reliable, although prices in a given year can deviate from the pattern due to unusual circumstances like crop failures and shocks in export demand (either good or bad). The most certain part of the pattern is that prices bottom out in the fall. Again, that’s hardly a surprise. Farmer deliveries spike at harvest time while export shipments are also picking up. Even in the 2021 drought year when crop conditions headed south, pea prices bottomed out in the summer. That said, it was a few weeks earlier than usual and didn’t last long.

While the seasonal bottom is not news, the weeks on either side of the lows can be instructive. It doesn’t happen every year, but prices for yellow peas tend to start heading lower in mid-June (late May for green peas). Even though supplies are at their lowest levels all year, buyers are already waiting for the next harvest in a few weeks. Some farmers might also be cleaning out their bins, especially if the crop in the field is looking good.

In 2023/24, yellow pea bids made solid gains in late spring, mainly due to the return of Indian demand along with shrinking Canadian supplies. Even so, it’s unlikely that prices can avoid the downward pull of the seasonals for much longer. This year’s very tight supplies could limit how far yellow pea prices will decline but the outlook for the 2024 crop (either good or bad) another key factor.

Once the harvest lows are over, prices will turn higher. The inevitable question of “how far” is the big unknown. Of course, the main factor is the size of the crop, not just in Canada but in other exporting countries. It’s far too early to have a firm handle on this year’s yields and crop size in western Canada and elsewhere. In the case of yellow peas, Russia has become the biggest competitor and crop estimates there have been slipping recently due to drought and frost. For green peas, the US is a sizable exporter and the crop there is looking positive.

Export demand is the other factor that determines how fast and far prices come off the harvest lows. For yellow peas, 2024/25 is the first year in a long while with two large buyers, India and China. Even so, there are large questions about both countries. India cut its import tariffs to 0% but for now, that’s only until the end of October. Chinese pea imports have been quieter recently and it’s not clear how long that will last. And in both countries, Russia is a larger competitor despite downgrades to its 2024 crop.

Even though markets are unpredictable, the harvest lows are as close to certain as possible. When making marketing decisions around those lows, it’s important to recognize the patterns. When prices start to drop in summer, that doesn’t have to mean the market is bearish and that farmers should bail out. They may just need to be patient, since the market is just doing what it normally does. Likewise, the postharvest rally isn’t necessarily a sign that the outlook is outright bullish and will keep going higher through the rest of the year. Rather it’s often just the typical recovery as the supply and demand return to a more stable balance.

Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.