I began writing this mid-December, knowing many of you will be reading it during Crop Production Week (CPW) in January. For the first time in years, there may be competition for pulse acres at the grain booths at CPW – and that will be a welcome change as 2013 greets you. For many farmers, lentils pulled their farm through the lean years and have been somewhat of a ball and chain over the past two years, as carryover stocks annihilated any chance of a major price rebound since the 2010/11 crop. Now that the 2012/13 crop is statistically put to sleep, we will take a look at what to expect over the next three months for old and new crop pulse pricing. It will be all about weather south of the border.
Pay close attention to any weather outlooks you have the opportunity to listen at CPW. The United States Department of Agriculture’s (USDA) supply and demand reports on Jan. 11 will be very important and could affect pulse pricing until the end of the crop year. Without a slowdown in demand, ending supplies will tighten further unless the USDA finds more grains and oilseeds. They could also project an increase in production, muting any upward price movement. Therefore, this should be on your radar early in the new year.
Peas: For Saskatchewan (SK), StatsCan’s December production estimate lowered pea production by 10,800 tonnes versus their October estimate. For Western Canada, the green/yellow split was 87% yellow peas and 12% green peas, with 1% designated as others (maple marrowfats) for a total of more than 2.803 million (M) tonnes. (For a look at Canadian peas by class from 2007-2013, visit www.saskpulse.com.) There were no major surprises in the report and they will not materially affect supply and demand estimates going forward. Yellow edible peas continue to enter the feed market at $8.75–$9 but mostly on the export side of the ledger. Domestic disappearance of peas is running 57% behind last year’s pace as of Dec. 9. Exports are 22.5% behind.
Some of the slowdown can be attributed to increased cash flow from wheat sales in the new marketing regime that began on Aug. 1, 2012. During the second week of December, India’s rabi seeding had nearly caught up to last year’s sowing pace. Government officials are still hopeful that it will be 7–12% higher when seeding is complete, but given the results so far, that is not very likely.
The USDA released updated dry edible pea statistics that indicated that their harvest area increased 287,000 acres over 2011, thanks in part to a 150,000 increase in North Dakota. Production increased 104% over 2011 to 519,499 tonnes. Yield was estimated at 30.35 bushels per acre (bu/ac) versus 27.35 bu/ac in 2011. Yellow peas in North Dakota and Western Canada have been trading within 25¢ of each other while the variable in green peas is as wide as $3/bu in some locations, favouring the Canadian side. For yellow peas, I am a holder at these prices until a clearer picture of the United States (U.S.) drought is known. Green peas were in unchartered waters as soon as the price eclipsed $13/bu. Seed quality is circumspect for 2013/14 and there are already new crop bids of more than $10 in the market. Remember that greed is not always good and Gordon Gekko of the Wall Street movie fame became older and shrewder in his sequel.
Lentils: The lentil market did not need the additional 150,000 tonnes over the October estimate that StatsCan found in their December release. What was interesting was the movement back to the traditional green/red split among classes. Where last year, the split was more than 50% red lentils, this year it has fallen back to 39%. (For a look at Canadian lentils by class from 2007-2013, visit www.saskpulse.com.) The bright spot to date has been that exports are ahead of last year’s pace by 50,000 tonnes (13%) at the end of October with India leading the list of importers. With 650,000 tonnes of carry-out estimated for July 31, 2013, and three ugly years of above-average stocks at the end of July, the market’s job today is to discourage lentil seeding for next year.
Farmers in the Swift Current area won’t be dissuaded that easily. However, fringe areas will welcome wheat into their rotations that have been maxed out on pulses. When you look at the Saskatchewan Ministry of Ag’s lentil yield estimates versus StatsCan’s, there are areas that still produced more than 25 bushels per acre of lentils this past year. The economics of $12/bu lentils versus $8/bu wheat (with higher input costs for wheat) will not have the desired effect of reducing lentil acres next year.