Huge Australian lentil crop could see prices weaken

Pulse crop analysts believe red lentil prices could fall in the second half of 2016-17.

The biggest immediate threat is the unusually large Australian lentil harvest making its way to markets in Asia and the Middle East.

The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) estimates farmers harvested 450,000 tonnes of lentils, up 63 percent over the five-year average.

Marlene Boersch, analyst with Mercantile Consulting Venture, said in a recent article she wrote for Saskatchewan Pulse Growers that she believes the crop is “substantially bigger” than the ABARES report.

“This will tip the supply-demand balance and pressure markets in Asia and the Middle East,” said Boersch. “So even with the overall increased demand for lentils and the catch-up demand from last year, we could see red lentil values weaken.”

Peter Wilson, chief executive officer with AGT Foods Australia, said farmers in that country are still in the thick of harvest but so far it looks to be a good quality bumper crop.

He said a record area of lentils was seeded in southern Australia, and growing conditions were ideal.

“I would agree with Marlene’s comments,” he said in an email.

“Quality so far looks to be good from the Australian harvest, with minimal rain interruptions experienced thus far.”

Chuck Penner, analyst with LeftField Commodity Research, said his contacts have told him the Australian lentil crop is more than 500,000 tonnes.

The initial June ABARES estimate for the 2016-17 crop called for 330,000 tonnes of production, so that is far more lentils than the market was anticipating. That presents stiff competition for Canada in overseas markets.

New crop Australian desi chickpeas and red lentils started being loaded on vessels in November with the heaviest shipments occurring in December and January.

“We would see strong arrivals into key destination markets spread from December to February and beyond,” said Wilson.

“These arrivals combined with earlier product from Canada and a good local crop of pigeon peas in India will see the supply pipelines satisfied for the moment.”

Penner said the chickpeas were the first to arrive in India. Australian farmers harvested 1.23 million tonnes of the crop, which was 59 percent more than the previous five-year average.

“Now we’re seeing (Indian) chickpea prices just plummet because of the arrival of Australian chickpeas,” said Penner.

Lentil prices are starting to soften, but the chickpeas were harvested before the lentils so the full impact of the Australian lentil exports has not been felt.

“There’s probably more to come,” said Penner.

Wilson said buyers have plenty of options to consider when buying lentils.

“We can expect them to work carefully to get the best deals possible from suppliers such as Australia and Canada,” he said.

Boersch estimated Canadian lentil shipments were behind last year’s pace as of the end of December, despite growers harvesting a crop that was 28 percent bigger.

Part of the problem is finding the right quality. She estimated that 380,000 to 400,000 tonnes of Canadian lentils can’t be sold for human consumption.

There are also concerns about India’s looming rabi (winter) crop. Farmers had planted nearly four million acres of lentils as of Dec. 30, which is 19 percent ahead of last year’s pace and 11 percent above the previous five-year average.

Soil moisture conditions were good and reservoirs were full at seeding, which could result in a large domestic supply of lentils.

However, almost no rain has fallen since planting occurred.

“Trying to guess the size of the rabi pulse crop at this time of year is nigh impossible,” said Wilson.

Another bearish factor in the lentil market is the looming March 31 expiration of an Indian policy exemption that allows Canadian pulse shipments to be fumigated with methyl bromide in India rather than in Canada.

That has exporters worried because shipments could be turned away if the exemption is not extended.

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