2014 Canadian lentil production (000 tonnes)
Yellow pea prices should rise next year because of pulse production problems in India, says an analyst.
“I think we’re going to $8 (per bushel) on yellow peas,” Marlene Boersch, managing partner of Mercantile Consulting Venture, told Agri-Trend’s 2014 Farm Forum Event.
She believes peas are undervalued, but lentils are about where they should be and should remain near today’s levels for the rest of the crop year.
Some growers say they have already seen $8 bids for yellow peas.
They can thank India.
Boersch said the country will likely import 6.15 million tonnes of pulses in 2014-15, up from 3.93 million tonnes the previous year, which is why she acknowledged her $8 forecast might be conservative.
India’s kharif (summer) crop produced 5.2 million tonnes of pulses, 26 percent below the government target.
The government hopes for 12.5 million tonnes of production out of the rabi (winter) crop.
“They will fall short of that,” she said.
India’s overall monsoon precipitation was 12 percent below the long-term average. The deficit is as high as 30 percent in the northwest, where most of the rabi pulses are grown.
Chickpea planting is 15 percent behind the normal pace.
Boersch forecasts 16.35 million tonnes of combined kharif and rabi production, which is well below the government’s target of 19.5 million tonnes.
She believes India will need to import an additional 2.12 million tonnes of pulses on top of its usual four million tonnes.
“That’s why we’re thinking they will come for a second tranche of buying after Christmas,” said Boersch.
She also anticipates reduced competition from Russia. The country is in recession and growers are likely having a tough time finding enough capital for quality inputs.
Peas have sold at a record pace. Bulk exports are 1.5 times what they were the same time last year. Boersch sees a paltry 215,000 tonnes of carryout and a six percent stocks-to-use ratio.
Pea prices could really take off if China decides to use the crop as a feed alternative to corn.
China has reduced its corn imports because the government has huge stockpiles of the crop that it bought at high prices. It is importing alternatives such as barley, sorghum, distiller’s grain and cassava.
Peas would be another cheap alternative source of protein.
“If they were ever to (use peas for feed), hold onto your seats because the volumes are right away very big,” said Boersch.
She expects green peas to continue trading in the $8 to $9 per bushel range.
Lentil demand has been excellent. Bulk exports are twice what they were this time last year.
Australia had a disappointing crop. Boersch estimates they will have 250,000 tonnes for export, down from 350,000 tonnes a couple of years ago. They will run out of supplies by summer. The United States should have about 120,000 tonnes of lentils for export, down more than a 50 percent from the previous year.
“That’s why we have seen such good green lentil prices,” she said.
Boersch sees 79,000 tonnes of lentil carryout and a friendly four percent stocks-to-use ratio.
Prices for top quality lentils could creep a little higher, but there could be pressure on poorer quality crop, with only 37 percent of the crop grading No. 2 or better.
“If they really drop the bids on the lower grades, I would be a little bit patient,” she told growers.
India has been buying a lot of poor quality Canadian lentils, which has been a godsend.
However, Boersch warned growers not to wait too long to book sales because pea and lentil acres could increase next year, which could put a damper on prices come spring.
However, in her first attempt to develop crop budgets for next year, she was surprised to discover that peas were one of the few crops that might have negative returns based on an estimated new crop price of $6.50.
Lentil returns still look favourable.