Pulse Market Insight #296

Seasonal Tipping Points Approaching

Performance in pulse markets has been very mixed this year, with some notable shifts recently. Prices for yellow peas and red lentils have shown some decent gains over the past couple of months. Others like green peas and green lentils are looking weaker, while kabuli chickpeas are steady.

When viewing the latest trends in these crops, especially the positive ones, it’s natural to expect (or hope) they’ll continue. As the old saying goes, “the trend is your friend”. There are solid fundamental reasons, particularly stronger export demand, behind the improvements in yellow pea and red lentil prices. And yet, these markets won’t keep climbing indefinitely. Prices trend higher, until they stop.

Fortunately, history provides a timeline of when that turn lower will happen. The most consistent part of seasonal price behaviour is the decline that happens virtually every summer. Even in 2021/22, with a severe drought underway, prices started to dip in summer before rallying.

While every year is a bit different, the main reasons behind the summer downturn are straightforward. Once the seed is in the ground, buyers back off from the market as they wait for the upcoming crop, even if it’s expected to be a bit smaller. At the same time, more farmers look at emptying bins and finishing old-crop sales. Overall, market activity slows ahead of the slug of harvest deliveries. The chart for yellow peas shows the seasonal index starting to decline a couple of months before harvest and hitting a bottom when off-the-combine deliveries peak.

Even though there can be a bit of “wiggle room” on the exact timing, this price behaviour is very consistent and predictable. In fact, it’s basically inevitable with the rare exception of a crop failure on the order of 2021/22. And yet, the price drop that happens every summer still seems to catch some people off guard, making them wonder what’s wrong with the market.

The chart above shows that for yellow peas, there isn’t an obvious spring peak in prices; it’s more of a “plateau”. That said, the drop-off in early summer is clear-cut, which starts around mid-May and accelerates lower by mid-June. For red lentils, there’s a more obvious peak in the seasonal index which also occurs in mid-May before turning steadily lower and bottoming out in mid-September. For red lentils however, the seasonal pattern shows there’s not as much of a postharvest recovery.

The seasonal index for all crops is at its most predictable at this time of year and can provide guidance for timing of remaining old-crop sales. The chart below shows how and when red lentil prices will change, assuming they’ll follow the seasonal timing. As of mid-April, the average bid in western Canada was just over 25 cents per pound. On average (the red line), seasonal behaviour indicates a small increase is likely four weeks out (mid-May). At eight weeks from now (mid-June), prices will be past the seasonal peak but won’t have dropped much yet. At twelve weeks out (mid-July) though, the seasonal pattern will have turned lower.