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What is the New Normal for Saskatchewan Pulses?

Jun 06, 2014

A good question was raised at this year’s International Pulse Industry Convention CICILS IPTIC in South Africa -- What What is the new normal? Given that Saskatchewan had two unusual crops in five years and just experienced one of the worst winters in living memory, some people think “average” has lost its meaning. A wet finish to the growing season in 2010 caused significant crop damage, with 79% of the lentil crop grading Extra 3 or worse. The percentage of offgrade lentils was similar to what was experienced in 2002. What sets the two years apart is the fact that the 2010 lentil harvest was a record 2 million (M) tonnes, while the 2002 harvest was a miniscule 328,000 tonnes. Markets were overwhelmed by the quantity of offgrade product harvested in 2010.

Last year’s harvest was the polar opposite. More than 91% of the lentil crop was graded No. 2 or better, even though average yields were a record 1,700 pounds per seeded acre. Because land seeded to lentils had fallen more than a million acres between 2010 and 2013, last year’s harvest was only the second largest in history.

The 2013 harvest is significant for another reason. It illustrates how much can be grown if conditions are right. It is now clear that the yield potential of lentil varieties being grown in Western Canada is at least 29% above the previous five-year average and at least 22% above the previous high. Similarly, potential field pea yields are at least 29% above the previous five-year average and 9% better than the previous high.

Another interesting fact is that average lentil yields have been more than 1,000 pounds per acre (lbs/ac) every year since 2003. The rolling five-year average yield has been on a clear uptrend since the 2000-2004 period when lentil yields averaged just 863 lbs/ac. During the 2008-2012 period they averaged 1,342 lbs/ac and jumped to 1,424 lbs/ac between 2009-2013. Both genetics and rainfall played a big role in those increases. The pace of seeding has also changed in recent years. Research has shown yields are better when crops are sown early. If early is assumed to be the third week of April, then average yields are rising even though seeding is starting later. For the fourth year in a row, less than 10% of Saskatchewan’s lentil crop was in the ground by the first week of May. During the previous 20 years, that only happened five times. Interestingly,
this is the first time in the last 25 years that this occurred more than two years in a row. These changes do not mean that seeding early makes no difference. More likely, “early” isn’t a date as much as it is timing. Worried about seeding late, growers put more effort into seeding fast. Maybe more crop is seeded during its optimum window for that specific year. Climate change is still a controversial topic for two simple reasons. One, it is hard to say if this year’s weather is caused by climate change. Secondly, everyone’s perception of “normal” changes with time. If Saskatchewan is destined to receive more annual rainfall as climate changes, years like 2010 and 2014 might happen more often. By contrast, climatologists think there will be more frequent droughts in the United States’ (U.S.) corn and soybean belt. There could be years when drought causes corn yields to fall as much as 30%. Such years would see less dramatic, but still significant reductions in soybean yields, more often than not, causing a bu ll market for both grains and oilseeds. If pulses do not follow their lead, acreage would be expected to drop the following year. Having said that, it is hard to see how pulses could not follow those markets upward.

Predicting when such events will occur may be getting harder. Government forecasters in the U.S. were dead wrong about this year’s winter. Few people expected it would be the most severe in more than a generation. Markets are nervous. The past year has seen the flood of the century around Calgary, one of the worst winters in living memory, and historic flooding in Serbia and Bosnia.

Reflecting on such events, markets are getting increasingly nervous about this year’s possible El Niño event. Forecasters in Australia and the U.S. are more than 65% confident it will start in June or July. This is often associated with a poor monsoon in India, drought in Australia and Indonesia, and below- normal precipitation and above-normal temperatures in North America’s plains regions.

Some climatologists think this will be an unusually strong El Niño, if it arrives. They speculate that the oceans have been absorbing more heat from the atmosphere than usual, seemingly ending global warming. If this is so, that heat would be expected to be released into the atmosphere as the surface of the ocean warms. The hotter the ocean, the greater the potential for the prairies and U.S. plains to be much warmer and drier than usual through the summer of 2015. Pulse traders in India and Pakistan are paying close attention to the steady warming of the Pacific and this year’s below-normal monsoon forecast. This has resulted in a classic case of “buy the rumor and sell the fact.” Significant quantities of red lentils and yellow peas have been bought for shipment through December. Buyers are betting that a weak monsoon and El Niño will result in smaller harvests for both the karif and rabi crops, causing prices on the Indian subcontinent to rise.

This combination of events suggest there is great potential for prices for pulses harvested this year to set their lows early in the marketing year and for demand to start building before harvest and remain strong through at least November.  

There are also big risks. If there is no El Niño event and the monsoon is closer to normal, many buyers on the Indian subcontinent will “sell back” some of their purchases. An El Niño event could result in a drier and warmer harvest period, but the experiences of 2010 remind us that untimely rain can have a devastating impact on quality.

The bottom line for growers is that there will be good chances to sell a large part of this year’s crop for early shipment. Whether or not there is an El Niño will soon be known. That will have a direct impact on how much product exporters need to buy this summer and fall and their ability to push bids to originate pulses. Getting grade discounts on sales made before harvest will provide an important hedge against bad harvest weather. Ending stocks of peas and lentils will not be burdensome, and as a result we will not have much more to sell next season than we grow this summer. That makes it important to not oversell the coming crop.

Brian Clancey is the Editor and Publisher of www.statpub.com market news website and President of STAT Publishing. He can be reached at editor@statpub.com.

Click here to read full report: http://www.saskpulse.com/uploads/content/7612_spg_pulse_market_report_june_2014_WEB.pdf

Source: Saskatchewan Pulse Growers