Prices buoyed | Global shortfalls and strong exports perk up Canada’s lentil outlook
Lentil prices should remain strong because of soaring demand and shrinking supply, say two major pulse processors.
“Production shortfalls projected for India may represent a demand catalyst that we expect may continue through the second half of the year,” Murad Al-Katib, president of Alliance Grain Traders Inc., said in a news release.
He also expects a strong export program to Turkey this year.
The combination should help correct a global supply-demand imbalance that pushed lentil prices down in 2012.
Al-Katib recently told investment analysts that the recovery in lentil markets started in the first quarter of 2013 and has continued into the first half of the second quarter.
Canadian lentil exports were up 76 percent over the first quarter of 2012, while pea shipments increased 122 percent.
Al-Katib is forecasting the usual slowdown in sales during the second half of the second quarter as India’s and Turkey’s crops hit the market.
He anticipates demand will return with full force starting in August as India restocks its supplies following the Ramadan festival.
Demand should remain strong well into the new crop year due to what Al-Katib believes is a disappointing rabi harvest. He said he bases that assumption on AGT’s unusually strong sales program to the country during the first four months of the year.
“In traditional years, if India has a normal crop we don’t ship anything into India in February, March and April,” he said.
The Indian government is forecasting 17.6 million tonnes of combined kharif and rabi season production, which would require 3.1 million tonnes of imports to meet annual pulse demand.
However, significant February and March rainfall in northern India, a key production region for pulses, may have reduced production.
The U.S. Department of Agriculture thinks the country could import four million tonnes of pulses.
Turkey’s harvest is just getting underway, and the USDA is forecasting 460,000 tonnes of lentil production. AGT said unofficial estimates in the lentil trade suggest Turkey’s harvest will be closer to last year’s production of 375,000 tonnes.
That would lead to strong imports of red and green lentils to meet Turkey’s domestic needs and supply its re-export program to the Middle East and North Africa.
Al-Katib said all signals point to the continuation of the “upbeat tone” in pulse markets during the first half of 2013 as concerns over credit availability and currency volatility subside in importing countries.
“Our expectation is that import demand may increase in core consumption markets,” he said.
Legumex Walker Inc. also highlighted the return to normalized demand in its quarterly results.
“Problems with winter crops on the Indian subcontinent have been and could continue to be a major demand catalyst for Canadian pulses,” the company said in its Management’s Discussion & Analysis document.
President Joel Horn said global pulse demand has been depressed for a long time, warehouses are empty and customers are finally starting to restock. In addition to strong imports from India and Turkey, there has also been a resurgence in buying in the Middle East.
“We definitely are starting to see more demand for our products. There’s more buyers, better prices in our markets, without a doubt,” he said.
Horn said it appears global pulse production will fall this year.
“We’re just too early in the cycle, but yes, there seems to be a drumbeat going on that we’re going to have a decline in various parts of the world, and if that does happen yes, that would be good for prices,” he said.
Agriculture Canada is forecasting a 17 percent year-on-year decrease in lentil production, while the USDA is calling for a 26 percent decline south of the border.
“Lower supply, decreases in carry-in stocks and increased import demand may have the result of correcting global pulse prices,” said Al-Katib.
It’s a different story on the supply side for peas, with Canada expected to increase production by six percent and the United States by 28 percent.
AGT said that late seeding in Canada and the U.S. may favour a switch to pulses from oilseeds because of the short maturity of peas and lentils.
LWI said pulses are usually seeded early, but they may go in the ground last this year because producers will likely want to plant long season crops such as wheat and canola first due to the shortened seeding window.
That could reduce yield potential, but LWI still expects ample supply for its business operations.
“We’re not currently feeling nervous,” said Horn. “Are we watching it very closely? You bet.”