Dry conditions on parts of the Prairies will see production drop, but major export markets have sufficient stocks
VANCOUVER, B.C. — Red lentil markets are in gridlock, according to a panel of experts gathered at Pulses 2017.
“The Canadian supply may be short, while on the other hand destination markets are full,” said Farhan Adam, chief executive officer with Marina Commodities Inc.
“In short, it’s a standstill situation for Canadian lentils. The future now is in Mother Nature’s hands.”
Chuck Penner, analyst with LeftField Commodity Research, believes red lentil prices have finally stabilized after a prolonged downward plunge since the start of 2016.
He forecasts stable to higher prices, largely depending on the Canadian harvest.
Smaller crops in Canada and Australia should be adequate to meet the reduced demand from key markets like India and Turkey.
Anurag Tulshan, owner of Esarco Exim Pvt. Ltd., said India produced 800,000 tonnes of red lentils last winter, which is 50 to 60 percent more than normal.
He estimates that with imports from Canada and Australia there is 800,000 tonnes of stocks in India right now, which is almost eight months worth of consumption.
“In India there is a problem of plenty,” he said.
That’s why Indian importers are not willing to pay anything above $500 per tonne.
The other big buyer of Canadian lentils is Turkey.
Penner forecasts 370,000 tonnes of Turkish production, which is a modest increase “but not a game changer.”
Merve Fettahoglu, international trade business manager with Goze Agricultural Company, one of the biggest lentil processors in Turkey, took issue with Penner’s estimate.
She said there was a 10 percent increase in planting and yields will be up about 30 percent, resulting in a crop of about 450,000 tonnes and total supply of 500,000 tonnes.
Fettahoglu warned Canadian exporters that Turkey has been very pleased with Australian lentils and may buy another 30,000 to 40,000 tonnes from there this year.
Penner forecasts 1.9 million tonnes of Canadian production, down from 2.5 million tonnes last year. A 45 percent decline in acres will be partially offset by better yields.
He estimated carryout at 205,000 tonnes, but much of that will not be of exportable quality.
He forecasts 1.7 million tonnes of exports, down from 1.84 million tonnes in 2016-17.
“What we’ve seen, so far anyway, with the dry conditions is that the quality should be better,” Penner told his international audience.
Exports out of Australia are expected to be much lower.
The Australian Bureau of Agricultural and Resource Economics and Sciences forecasts 530,000 tonnes of production, down from 830,000 tonnes in 2016-17.
But Pulse Australia thinks it will be lower than that. It forecasts 370,000 tonnes due to dry conditions.
Australia exported 700,000 tonnes of lentils between October 2016 and May 2017. It has about 100,000 tonnes left to sell in this campaign, so exports have slowed.
“Next year with the crop considerably smaller, we’ll see those numbers come back down to probably 300,000 to 350,000 tonnes,” said Penner.
Adam believes it is going to be difficult to source new crop lentils from Canadian farmers this fall. He thinks Canadian production will be well below 1.8 million tonnes due to extremely dry conditions in southern Saskatchewan.
“This creates a bullish sentiment and we know our growers will not sell cheap,” he said.
The other problem is that wheat and canola prices are good and that should generate enough returns to allow growers to lock up their lentil bins.
“It is definitely, at the moment, not easy for us to buy red lentils on farms with these conditions,” said Adam.