Pulse Market Insight #261 OCT 11 2024 | Producers | Pulse Market Insights
Post-Harvest Price Response
We’re big fans of seasonal price patterns as a helpful way to gauge medium-term price direction. These tendencies aren’t foolproof and prices don’t follow them every year. The most consistent and most well-known part of seasonal price behaviour is the “harvest low”. The timing is slightly different for each crop but happens as buyers step back to wait for upcoming new-crop supplies and is often deepened by farmers cleaning out remaining old-crop supplies.
Even though seasonal lows are a well-known event, there tends to be an extra bearish tone as prices decline through the summer toward the lows. Both farmers and buyers start to wonder whether the weaker prices are a sign that market fundamentals have changed for the worse. That fear of even lower prices can trigger more selling and add to the lows. Generally though, prices do move higher from the seasonal bottom. After all, they’re called the “lows” for a reason.
To test these ideas, we recently decided to see how crop prices in the past few years have responded as they head into the fall and early winter. Essentially, we wanted to answer two questions: “How often do prices recover following harvest?” and “If so, by how much?”. To do this, we looked at eight years of prices for the end of October, end of November and the end of December and compared those against the price during the normal seasonal low. We also compared the price during the normal seasonal high against the harvest low price.
Here’s what the analysis showed for yellow peas. Compared with the seasonal low that occurs in mid-August to mid-September, prices at the end of October were higher in seven of the last eight years. On average, the end-of-October price was higher than the seasonal low by $0.92 per bushel or nearly 11%. The same pattern shows up for both end-of-November and end-of-December prices, with the average change $1.06 and $1.39 per bushel respectively. On average, the seasonal high for yellow peas tends to occur in early March and prices in that timeframe were higher than the seasonal low in seven of eight years, with an average change of $1.48 per bushel.
You may note that the only exception in this behaviour was 2017. That was the year India imposed import tariffs and other restrictions on pea (and other pulse) imports. In every other year, yellow pea prices rose through the fall and early winter months. Not surprisingly, the largest increase was seen in 2021 due to the drought, and the smallest gain was in 2019.
Similar responses were seen in green pea and kabuli chickpea prices. The positive response in lentil prices was still evident but the changes weren’t quite as consistent as with peas. For all pulses though, the main exception to the tendency occurred in 2017, due to the shock of India’s import restrictions.
We wouldn’t be surprised if farmers tell us that “nobody sells during harvest” unless they have to. But we know that some selling does occur then and reasons can include things like cash flow needs and lack of bin space, but the fear of prices dropping even further is also a consideration. The point of this analysis was to quantify how much potential gain is given up (in most years) by selling around the harvest lows. That way, farmers can make informed marketing decisions.
Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.