Because Canada is the dominant exporter of pulses, including peas, it’s natural to focus on the crop situation here while ignoring what’s going on elsewhere. Even though Canada has well over half the global market share, developments in other countries either add to or take away from export opportunities.
Many of the same market factors influencing Canadian farmers are also occurring in other countries. Historically high prices, especially for yellow peas, are encouraging more production in 2016. In addition, India’s huge demand for pulses has opened up trade channels that didn’t exist previously. This year’s record Indian imports have included purchasing peas (and other pulses) from countries that haven’t normally been on the radar. Although the amounts were modest, these trades have now become a precedent for next year and beyond.
In the Indian marketing year (Apr-Mar) just completed, Canada accounted for nearly two-thirds of the 1.7 million tonnes of peas India purchased. Even so, countries like Russia, France, the US and Australia account for a sizable and a growing portion of the market. This year, we also noted Baltic countries such as Lithuania and others have started to make their presence felt as alternate sources for India. In addition, Argentina and some African countries moved smaller amounts of peas into India last year. Simply put, India was buying peas from anyone that had supplies, and these trade routes have now become established.
A few weeks ago, the StatsCan survey revealed Canadian farmers would be expanding pea seeded area by 16% over last year to a new record of 4.28 million acres. Farmers in other countries have been receiving the same encouraging price signals. The USDA reported record US seeded area at 1.42 million acres, 24% more than last year. Seeded area in Australia is also expected to rise 7% from last year. Reports from France, Russia and Ukraine are pointing to solid acreage increases.
If growing seasons progress normally, the countries in the chart could produce an additional 1.7 million tonnes of peas in 2016. It’s important to remember however that the amounts shown in the chart are very early forecasts and are based on average yield outcomes. As such, it represents a middle-of-the-road estimate of crop size. It could be smaller, but it could also be larger. In some countries, the 2016 crop hasn’t all been planted yet, and it hardly needs to be said that the weather is the biggest factor in determining actual results. Probably the biggest unknown is right here in Canada, where dry conditions in the western prairies are already a concern.
The bottom line is that there is potential for a large increase in the global pea crop which introduces some risk of lower prices. At the same time, larger import demand from India and other South Asian countries will chew through some of those extra supplies, but possibly not all. As a result, risk management for 2016/17 should include forward selling a good portion of the expected 2016 crop at historically high new-crop bids, which are still available.
If there is upside in next year’s market, it would largely depend on crop problems, especially in Canada. That’s a good reason to leave some (but not all) of the 2016 crop unpriced. In our view though, betting on a crop failure here by leaving the whole crop unpriced is a high-risk strategy.
Source : Albertapulse