What To Expect From StatsCan's Stocks-In-All-Positions

Markets are experiencing one of the quietest times of the year. Seeding of rabi season crops on the Indian subcontinent has wrapped up and the first fields sown are already being harvested. Australia has finished harvesting its pulse crops and buyers are busy receiving freshly harvested product. In North America, farmers and the trade are still busy attending winter meetings and trying to digest all the information. (For information on upcoming winter meetings hosted by SPG, visit www.saskpulse.com.)

The only major market-making news at this time of year is Statistics Canada’s stocks-in-all-positions report for December 31, which will estimate on-farm and commercial inventories of peas, lentils, and chickpeas. It is the first objective look at how demand is shaping up for the marketing year. People tend to react to the published number but what they are really thinking about is inferred demand. This is the difference between how much was on hand on December 31 and how much was available after adding together the carryover and last year’s harvest.

Available data suggests the lentil inventory on December 31 could have been a record high, at 1.56 million tonnes. Though exports got off to a strong start, they dropped off after the end of October. A key issue was that while India has been buying lentils at a record pace, demand from Turkey and the Middle East has collapsed. If lentil inventory is around 1.56 million tonnes, this season’s carry-out could end up closer to 725,000 tonnes, up from the current forecast of 625,000 tonnes. That would keep pressure on prices through the summer.

Markets will undoubtedly be unhappy with the pea inventory numbers. Unless StatsCan cuts its crop estimate or lowers last summer’s carryover, they could report almost two million tonnes of peas in all positions as of December 31. High prices can create the illusion that supplies are tighter than they are because many people think prices will keep rising. High prices also hurt demand because they encourage end users to look for alternatives. This is true of green peas. There is a fundamental shortage of green peas in the world. Given that acreage in green peas will rise sharply this year, it does not make sense to wait until July 31 to bring unsold green peas to the market. There will come a point where end users will try to make inventories last until the North American harvest starts and prices drop to levels they view as more “reasonable.”

Yellow pea markets face the opposite problem. There are lots available in Canada. Australia has just harvested a record desi chickpea crop and it is currently more competitive than Canadian yellow peas on the Indian subcontinent. At the same time, India has planted more desi chickpeas than last year. This combination could hurt demand for yellow peas through the summer. The implication is that next summer’s carryover could be much higher than expected, adding long-term pressure to prices. This means it is important to take advantage of chances to move product at profitable prices and to not confuse the strength of green pea markets with the outlook for yellow peas.

Source: Saskpulse