Monster pulse crop may hammer prices

The potential for a massive Indian crop will fundamentally alter pulse markets in 2017, says an analyst.

Normal monsoon rains combined with a sharp increase in plantings will likely result in a 2016-17 crop that will bring pulse prices back in alignment with grain and oilseed prices, said Brian Clancey, editor of Stat Publishing, a markets information service.

“India has the possibility of growing just a monster crop,” he said.

“I don’t think it’s unreasonable to think it could approach 22 million tonnes, which is almost equivalent to their annual domestic consumption.”

To put that in perspective, India produced 16.5 million tonnes of pulses last crop year and 17.2 million tonnes the year before that.

Clancey is advising Canadian farmers to strongly consider selling enough of this year’s pulse crops in the immediate post-harvest period to at least cover their cost of production.

“Given the possibility for what could happen next year, it’s probably a good idea to take advantage of any rallies in the market to sell.”

Clancey said it should come as no surprise to growers that pulse prices are heading lower. They have been at a premium to grains and oilseeds since December 2015 and that is encouraging growers around the world to seed more of them.

India has received good monsoon rains and farmers have planted 29 percent more pulses in the kharif (summer) crop than last year.

The rains have recharged soil moisture levels, which will likely lead to a sizable increase in rabi (winter) acres as well.

The rabi crop is when India’s chickpeas and lentils are planted and that has a major influence on Canadian yellow pea and red lentil prices.

Monsoon rains have not replenished the water reservoirs, which could lead to a reduction in irrigated crops. That could also contribute to an increase in pulse acres because pulses are dryland crops.

Another factor to consider is the Indian government’s minimum support prices (MSPs) for pulses. In the past MSPs were meaningless because the government wasn’t buying pulses from farmers at any price. But it is now planning to build buffer stocks of two million tonnes. It will be interesting to see where it sets MSPs for the coming rabi crop.

By the end of November it will be clear how many rabi pulse acres Indian farmers are planting and that is when prices could start trending lower.

Clancey said Canadian farmers have so far been shielded from dramatic pea and lentil price declines because there were a lot of sales on the books and exporters are buying crop to meet those obligations.

There are also quality problems with Canadian lentils, which is making it hard to source the right grades.

“It allows the market to ease into the lower value ranges, to trend lower rather than crash hard,” he said.

Stat Publishing estimates 2016 world pulse production at 53.7 million tonnes, which is seven percent higher than the five-year average.

That is mainly due to the surge in North American pea and lentil production with record crops in Canada and the United states.

Global lentil production is estimated at 6.4 million tonnes, which is 36 percent higher than average, while pea production is pegged at 13.2 million tonnes, or 21 percent above normal.

Clancey believes Canada’s lentil crop will be larger than many expect. Statistics Canada forecasts 3.2 million tonnes. He thinks it will be closer to 3.5 million tonnes and some in the trade are forecasting 3.7 million tonnes.

However, there are quality problems, especially with green lentils, so top quality large green lentils will likely buck the downward price trend longer than other grades and classes of the crop.

The global supply of beans and chickpeas remains relatively tight. But that will change in 2017 as India’s kharif and rabi crops hit the market.

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