Pulse markets recalibrating

Market Focus

Highlights

  • Cash bids for pulses have bounced back from winter lows, resulting in a sigh of relief in the trade
  • Lentil export interest may expand because importers need competitively priced, quality greens early
  • While trade issues make India a risk, we don't think Canada will be in a position to overproduce due to strong demand

Canadian pulse seedings this spring could end up being higher than initially projected by Statistics Canada.

The agency pegged lentil seedings at a relatively low 4.39 million acres, well down from last year's record 5.86 million and an average trade guess at closer to five million acres. StatsCan also put Canadian field pea acres at 3.99 million, a six per cent drop from 4.24 million last year.

The StatsCan acreage survey was conducted in March when the pulse industry was still under threat of losing access to the Indian marketplace over a non-tariff fumigation-related trade barrier. There was a cloud over the pulse sector during that time. But some of that uncertainty has lightened since then.

As farmers take to the field, there may be reasons for hope that a more permanent arrangement regarding Canadian pulse exports to India is at hand.

Now, as farmers take to the field to plant the 2017 crop, there is hope that a more permanent arrangement for Canadian pulse exports to India is at hand.

The Saskatchewan Pulse Growers say the Indian government recently posted draft amendments to its Plant Quarantine Order regarding import requirements for several products, including pulses from Canada.

SPG says the document suggest current concerns may be resolved through India's recognition and acceptance of Canada's approach for dealing with phytosanitary concerns in Canadian pulse crops imported into India.

There are still some potential limitations to trade outlined in the draft document, including a continued fumigation requirement. However, SPG says it's "encouraged by the positive steps towards the resolution."

Cash bids for pulses such as red lentils and yellow peas have bounced back a bit since SPG posted its update, resulting in a sigh of relief in the trade and probably inspiring some confidence in growers to boost acres a bit more than StatsCan forecasts - unless spring weather issues force last minute changes.

Lentils

Large green lentils buyers are slowly starting to show interest in locking up new crop acres, with fall delivered prices sitting at 38 cents for No. 1 grade, 36 cents for No. 2, and 34 cents for No. 3 grade.

Red lentil bids range from about 24 to 26 cents per pound - not great but it still compare well with their five and 10 year averages.

Even if StatsCan area ends up higher than stated in its April 21 report, we cannot assign a lentil production number higher than 2.75 million tonnes today. This would mean about 1.8 million tonnes of reds (2.5 million tonnes last year), 650,000 tonnes of large greens (500,000 tonnes last year) and 300,000 tonnes of small greens (215,000 last year).

Export interest would be poised to expand because importers need competitively priced quality greens early and due to ongoing demand in reds.

Price prospects for next year should at least give an opportunity for a rising red price at some point in 2017 and 2018.

Peas

Yellow pea prices have strengthened. Line company old crop bids are back up to around $9 a bushel.

Canada's pea story is not told by a Canadian pea supply/demand balance sheet, rather is told by the fact that Canada's huge 2016 crop was disposed due to ongoing interest from India affordable as a pulse choice versus expensive chana), China demand (starch), and domestic use (protein fracking and pet food).

With desi and chickpea prices poised to be strong throughout this calendar year, buying interest from India should continue despite the trade policy uncertainties. Meanwhile, the Chinese and our domestic use story are only expanding.

While trade issues make India a risk, we do not think Canada will be in a position to overproduce relative to still strong demand. I suspect yellow peas remains a good 2017 crop choice - assuming weather and agronomics cooperate.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. 
Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.

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