What’s a “Good” Price for Pulses?
With friendly outlooks for several pulse crops, the normal temptation is to wonder how high prices can go and when to start selling. While it’s impossible (aside from sheer luck) to predict the top of a market, looking at price levels from the past can provide some clues about how current prices stack up and whether it’s time to get some sold. It’s human nature to put more emphasis on the current environment and ignore price levels from just a few years ago. This is all about trying to put the current situation in a longer term perspective.
Essentially, the goal is to see how often current price levels have occurred in the past to determine risk versus reward. If today’s bids are at the low end of history, there’s little room for them to move lower and pretty good odds they’ll move higher. If prices are somewhere around the middle, they could move fairly easily in either direction, all other factors being equal. But if prices are already close to the top end of the historical range, there’s less potential for further increases and more risk of a decline.
There are a few ways to “slice and dice” the data to see how current prices compared to history. The pie charts below show how often (since January 2000) prices for both yellow and green peas have occurred. Currently, bids for yellow peas are in the high $8s to low $9s per bushel. The chart shows that bids have been above $9.00 only 4% of the time, meaning that today’s prices are fairly rare. That’s not to say they can’t go higher and current market dynamics are bullish, so we don’t expect prices to collapse anytime soon. Getting more peas priced at these high levels may not give you bragging rights at the coffee shop, but it is a solid marketing strategy.
Meanwhile, current green pea prices are actually below yellow peas, an unusual situation.
Currently, bids are closer to $8.00 per bushel. Looking at the pie chart for green peas, we see that 23% of the time, prices have been between $8 and $10, $10-12 per bushel 9% of the time and above $12 another 7% of the time. This tells us current green pea bids around $8.00 occur fairly frequently and have more room to move higher than yellows do. Of course, these charts need to be viewed in light of the current market environment which is friendlier toward yellows than greens.
Another way of looking at price data is by calculating the percent of time that bids are above a particular level. The chart below shows a price distribution for red lentil prices over the past fifteen years. Looking at either end of the spectrum, prices have been above $11 per cwt 100% time and have almost never hit $50 per cwt.
So how do current bids stack up? Most new-crop red lentil prices are in the low $30s per cwt. Historically, bids have been $30 per cwt or higher 19% of the time. Ignoring current fundamental market factors for the moment, this would indicate prices have an 81% “chance” of moving below that level and a 19% “chance” of moving higher.
While these (and other) analyses are useful for gaining some perspective on prices, they shouldn’t be viewed in isolation; other analytical tools should also be used in combination. After all, there are fundamental reasons why yellow pea or red lentil prices have been driven to the high end of normal and it’s important to know the factors behind the move, and when the good times might end.
Source : Alberta Pulse