2013/14 Crops: Saskaboom!

Larry Weber Weber Commodities

Pulse crops could become “cash crops” once again

Thirty years ago, the Saskatchewan Pulse Crop Development Board (SPCD) was in its early development stages after a vote by farmers started what is now Saskatchewan Pulse Growers. During those early stages, total pulse production in Saskatchewan was a feeble 79,000 tonnes a year. This year, Saskatchewan is projected to grow a combined 4.245 million (M) tonnes of pulses (peas, lentils, chickpeas, and soybeans). If you would have asked a farmer what he was growing in 1983, chances are “cash crops” would have been the hashtag that would have made the rounds verbally in coffee shops rather than tweeted on Twitter. Cash crops were the choice description rather than “pulse crops.” The pulse vision that those early pioneers forged is paying dividends today as yields and production are ever increasing. However, over the next 12 months, expect the term “cash crops” to start resurfacing again. Pulse crops will generate cash while traditional grains and oilseeds struggle to find transportation capacity.

Why are we looking at all crops in this Pulse Market Report? I’ve been in this business longer than I like to admit (longer than the SPCD) and never during my tenure have I witnessed yields that came off this fall over not just Saskatchewan, but Western Canada in general. And not like in past years when just one crop excelled – this year all of them were above average. A phone call I took from a grower best described it: “I harvested two crops in one.”

Unfortunately, the vision that was so aptly displayed from the pioneers in the pulse industry has not translated over to the handling and transportation side of the equation. While growing crops is still the greatest risk/reward I see from my desk, this year selling and moving them will be just as challenging and the system will be taxed like never before.

In Saskatchewan, based on the last Statistics Canada production estimates, this year’s crop is 36.5% larger than the 10-year average. It is 13.8% larger than the 2009/10 crop (the second largest in the past 10 years). Here is the kicker: When StatsCan releases its final estimates for this year’s Saskatchewan crop on December 4, expect all the production estimates to be adjusted higher. This crop is still underestimated. Saskatchewan grain handlers will need an extra 93,856 railcars to move the extra grain over the 10- year average. Those extra railcars required would stretch from Saskatoon to Prince Rupert, BC. Want an extra visual? If the grain above the 10-year average was stored in a 10-foot (ft.) wide grain bag, that grain bag would be 1,893 kilometres (KM) long. Based on StatsCan’s production estimate, it would require an extra 533 railcars per station, on top of the already 176 primary elevators registered in Saskatchewan, just to move the grain above the 10-year average. And given railway performance, that will not happen. Logistics will hold this crop in your bins/bags if you are not proactive.

Peas

StatsCan raised its September field pea production estimate to 477,000 tonnes over the August estimate, or 14.4% higher. Alberta’s average yield came in at a whopping 50 bushels per acre (bu/ac) while Saskatchewan’s was 10.1 bu/ac less at 39 bu/ac. A 3.5-bu increase in Saskatchewan to 43.4 bu/ac puts pea production over 4 M tonnes. I expect that to happen in December. In a year where India’s pulse production is increasing and moisture conditions are above normal, any additional production is not good news to pricing going forward. Additional bulk vessel sales out of Vancouver this fall won’t happen as space has been booked for the past three months. I would not want to have unsold peas once the calendar changes to 2014 unless the weather turns for the worse in India. Feed pea prices remain competitive with yellow peas and that is a great thing given that this year’s total pea production is still estimated much too low. Green peas have actually gone up in the past month, with $12 seen at a location in northwest Saskatchewan. I’m a seller at these levels as shorts get covered. The biggest lesson for traders is that growers are in a great cash position and few need to sell. As noted above, logistics is going to play such a big part in moving this year’s crop – it won’t be all about price.

Source : saskpulse