Serious Damage for the Pea Market

For the last few months, our focus in the pea outlook had mostly been on India and what it might do as the February 28 tariff deadline approached. It turns out this wasn’t the biggest issue for the pea market. Last week, China decided to take out its anger about Canada’s tariffs on Chinese electric vehicles, steel and aluminum on Canadian farmers (again). The 100% tariff on Canadian peas was a complete surprise, as China’s retaliation was expected to come through its investigation into Canadian canola dumping announced last fall.

China has been the dominant buyer of Canadian peas ever since India’s last set of tariffs kicked in back in 2017. When India dropped its pea tariffs in 2023/24 and 2024/25, Canadian exports have been more balanced between these two large destinations. The biggest volumes exported to China have been yellow peas but it is also a large buyer of green and maple peas, which are also included in the 100% tariff.

If past behaviour is any indication, the Chinese tariffs won’t go away anytime soon. This means they’ll likely last into 2025/26 and affect next year’s markets. China has been able to find other sources of peas, when it opened its borders to Russian peas in 2023 and just recently to Ukraine. Whether these Black Sea peas will be able to meet the quality specs for the food and fractionation industry remains to be seen.

Meanwhile, the Indian government has kicked the “tariff can” down the road another three months by moving its deadline for zero tariffs on peas to May 31. On the surface, that seems helpful but won’t likely trigger much new trade for a couple of reasons. First, these short-term deadlines make it difficult for traders to assemble and ship sizable amounts in those time frames. Second and more important, inventories of imported peas are still very large in India, with some reports indicating a million tonnes in storage. Pea prices in India remain under pressure and there’s little interest in bringing in more peas. Canadian exports to India had already dropped considerably in the past 2-3 months and the zero tariff extension won’t reverse that slowdown.

For the rest of 2024/25, Canadian exports of peas will be severely constrained. No more peas will move to China and not many to India. And we still have a simmering trade dispute with the US which has at times been a large buyer of Canadian peas. Some other countries, particularly in South Asia, could buy more peas. In December, for example, Bangladesh was the largest destination for Canadian peas. That said, stirring up more interest in some of these countries could require lower prices. Even so, ending stocks of Canadian peas in 2024/25 will be considerably heavier than expected earlier.

Just as (or maybe more) important is the question about what will happen in 2025/26. There are a few possibilities. One is that India could extend the zero tariffs again until sometime into 2025/26, which could allow a decent fall shipping program and help clear some of the heavy supplies. A resolution with China is also a possibility but feels like a long shot. Again, the Canadian pea market will need increased buying from some countries like Bangladesh that have not been consistent buyers in recent years. Even then, the Canadian pea market feels like it’s setting up for a very difficult year.

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

Market Signals from Weekly Data

More market transparency, information about how crops are being traded, is always a desirable goal. Timely information about sales and prices helps us do a better job of tracking supply and demand developments and gives us a clearer picture of what’s ahead. Ideally, if farmers and grain merchants would both provide information about the crops they’ve sold and the prices they’ve received, it would fill in a lot of the missing pieces in the market puzzle. But we’re not holding our breath.

Until that happens, we have to work with the information that’s available. While StatsCan is the data source most often mentioned (and criticized), the Canadian Grain Commission provides useful weekly data which offers some clues about market status and strength. This data includes commercial inventories at country elevators and at export terminals, farmer deliveries, shipments from country elevators and exports, among others.

Admittedly, there are some gaps in the CGC data but in our view, the three most important are farmer deliveries, elevator shipments and exports. If we think about the export pipeline, the leading market signal comes from the pace of farmer deliveries, as supplies are pulled into the handling system. Next, the weekly shipments out of country elevators are a strong indicator of how much of a crop is needed at the ports or to be moved south into the US or Mexico. Finally, weekly exports are reported, which shows how much is on its way to other countries. Other bits and pieces of data add more context.

When we look at what these signals mean for peas, the data shows farmer deliveries were above average early in 2024/25, but volumes already started to drop below average in late November. And in the last few weeks, deliveries have been even slower, an advance signal that exports in the weeks ahead will get very quiet. The chart below with pea shipments out of country elevators shows a similar picture and confirms the slowdown.

The slow movement of peas is a clear signal of weaker demand. While that situation could change before the end of 2024/25 (the line for 2023/24 shows what happened when India dropped its tariffs and returned to the yellow pea market), movement of peas generally slows later in the marketing year. And if fewer peas are needed, a meaningful rally becomes less likely. Keep in mind, the CGC data for peas mainly includes yellows, with greens moving mostly by container.

The picture for lentils is more positive. The CGC data mostly includes red lentils as that’s the main type shipped through the elevator system. Weekly farmer deliveries have been close to or above average levels, which signals a strong pull into the elevator system. When it comes to shipments from country elevators to various locations, weekly volumes were slow to start 2024/25 but since the beginning of October, have remained mostly above average, sometimes well above average.

These above-average lentil shipments then turn into strong exports, although export totals can vary considerably from week to week. In general, these signals reveal that global lentil demand is still quite strong and raises the potential for higher prices, especially as on-farm supplies are drawn down.

Of course, the situation in western Canada is only one part of the global market, but it is a large piece of the puzzle for pulse crops. And the value of the information means we continue to advocate for more market transparency in Canada and elsewhere.

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

Turbulence Ahead for Peas?

The beginning of February marks the start of the second half of the marketing year. The first half of 2024/25 was mostly positive for pulse markets but there could be more turbulent times ahead. Typically, the last half of the marketing year is a lot quieter but this year, trade issues could be throwing several wrenches into the works.

As always, India is front and centre when it comes to pulse outlooks and that’s certainly the case again this year. Import tariffs for yellow peas were set at zero just over a year ago, which allowed a big increase in Indian imports, largely from Canada and Russia. Several deadlines to reinstate tariffs have come and gone, with February 28 as the latest. As supplies of imported peas grew and prices declined, the Indian trade has increased its pressure on the government to reimpose tariffs. Now there’s another signal that the government will return to its previous tariff policy.

Last week, yellow pea prices in India jumped nearly US$50 per tonne after a long series of declines. Possibly not coincidentally, this occurred at the same time as a major convention for Indian pulse traders. This raises the possibility that government officials have tipped their hand about restricting imports with tariffs after February 28.

Canadian exports of yellow peas to India have already been declining in recent months, with only 22,800 tonnes in December, but a shutdown in that trade would be damaging. Through the first five months of 2024/25, Canada has exported 675,000 tonnes of yellow peas to India, 55% of the total. While other countries like Bangladesh have stepped up to buy more in recent months, the absence of India would put a damper on movement of yellow peas.

That said, there are a couple of glimmers of hope for this situation. Indian farmers have responded to the lower prices and cut back on seeded area of peas. The latest reports show 22% fewer acres of peas this year. Satellite vegetation maps show conditions are better-than-average but not as good as last year, suggesting a smaller crop is coming in the next few weeks. Seeded area of chickpeas is also below average, which would mean those supplies will also not be large. One possible outcome is that yellow pea tariffs are reimposed but may not last long. That said, India will need to consume its large inventories of yellow peas and desi chickpeas before prices will rise enough to convince the government to open its doors again.

The trade situation in the US is also volatile but the impact would be less severe. Total Canadian pea exports to the US so far in 2024/25 have only been 42,600 tonnes, half of last year’s pace (the trade data isn’t clear on how many are greens versus yellows). With monthly exports averaging less than 10,000 tonnes, a slowdown or shutdown caused by tariffs wouldn’t be catastrophic. But it’s not nothing either. And for companies and farms that have been filling this demand, it would have a sizable impact.

It’s also not clear that China is in a position to start importing a lot more peas to take up the slack. After very quiet trade for most of 2024, imports did show some strength in October and November but already faded again in December. Plus, Chinese demand is divided between Russian and Canadian peas.

This certainly isn’t a friendly outlook for the pea market, especially yellows. While we’d love to paint a rosy picture, it’s just as important to know the risks ahead as the optimistic possibilities. And as always, events can quickly change and cause other, hopefully more positive, outcomes.

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