Alliance Grain Traders Inc. expects improved global lentil demand for the rest of this year.
Early indications are there will be substantial interest from India, despite reports of a record pulse harvest in that country.
Temperatures that dipped as low as -6 C in January appear to have reduced the size of India’s lentil crop, which was in the critical flowering and podding stage when the cold weather arrived.
Alliance president Murad Al-Katib told investment analysts that India was unusually absent from lentil markets during the fall but has been unusually active during the January through March period.
“That is a signal that there is certainly potential for strife in their supply,” said Al-Katib.
Purchases from the Indian subcontinent are essential for moving the large supply of off-grade production from Canada and Australia, a good crop from the United States and the remainder of Turkey’s dwindling supplies.
Chuck Penner, president of Left- Field Commodity Research, said it’s tough to get a good handle on what’s happening in India.
Lentil prices shot up in January in response to the Indian frost and to reports of wet weather during Australia’s harvest.
“Most of those gains have now come off again. We’re almost back to where we were before,” he said.
That suggests the frost damage wasn’t too bad.
On the other hand, India is near the end of its harvest and prices haven’t collapsed, which Penner said suggested the crop isn’t as big as many had originally expected.
Al-Katib is also optimistic about demand from the Middle East and North Africa, where political unrest is creating a market opportunity for pulses.
Governments in the affected regions are calming unrest by increasing supplies of staple foods such as pulses, and United Nations’ agencies are responding to the growing refugee crisis in North Africa by tendering for more pulses.
“We really see Turkey as being the feeder to the region,” said Al-Katib, whose company owns processing plants in that country.
“I can tell you that as an owner of a business, I’ve never been happier to have assets in that region of the world in the position that they are than I am today.”
Penner said he can understand governments wanting to keep their people happy by ensuring food prices don’t rise.
“But at the same time, if their economies are suffering because of all this turmoil, they may have difficulty financing that,” he said.
Another reason Alliance is generally bullish about lentil demand in 2011 is that extreme weather, high prices and a late, poor quality Canadian harvest created cautious buying throughout 2010.
The company anticipates importers will need to restock inventories after postponing purchase decisions during May to September last year.
Robert Winslow, an investment analyst with Wellington West Capital Markets Inc. who follows Alliance, shares Al-Katib’s optimism.
“We’re of the view that demand is improving,” he said.
“There is a (cyclical) uptrend that I think is intact.”
On the supply side, Turkey will be the first big lentil producer to harvest a crop in 2011. Conditions were dry during seeding but have improved since then.
Al-Katib believes the Turkish harvest will come in between the estimates he has heard of 388,000 and 550,000 tonnes. The country finally had a good harvest last year of 510,000 tonnes after drought ravaged crops the previous two years.
Canadian growers are expected to plant 2.7 million acres of lentils, down 22 percent from last year.