Canadian pulse seeded area will likely be down significantly in 2018 because neither prices nor demand are likely to improve soon.

That raises the question of where the former pulse acres go. For many, it will likely mean more canola area, and that raises worries about disease pressure.

Pulse area surged in the past few years as production problems in India and developing demand from China created opportunities for new sales.

Total area for the two crops climbed to a little more than 10 million acres in 2016, up almost four million from just three years before.

Total area slid back last year to about 8.5 million acres — 4.4 million for lentils and 4.1 million for peas — but that was still the second largest ever.

The problem is that a big part of the demand for pulses evaporated when India produced a record smashing crop last year and virtually overnight became self-sufficient. That is the main reason for the lack of sales to India.

The duties and fumigation issues that India’s government imposed are only a side note to the key issue of ample domestic supply and India farmer anger at falling prices.

With India out of the market, Canadian year-end lentil stocks are expected to rise to 750,000 tonnes, or about four months worth of demand, and a million tonnes or more of peas. In both cases, the stocks-to-use ratio would be record high.

India’s demand is unlikely to come back soon.

India’s government estimates that winter crop all-pulse area stands at 38.3 million acres, up nine percent from last year. Chickpea area, the main winter pulse, is 13 percent higher year-on-year. Harvest begins in March, and unless there is a sudden weather disaster, India is on its way to another bumper crop.

India’s ultimate goal in the pulse sector is to be reliably self-sufficient, but analysts warn of the danger of permanently cutting off imports.

G Chandrashekhar, who often writes about the sector in the Hindu Business Line, made that warning last week in a column. He said imports could be better regulated if the right to import was limited to actual users — that is, pulse processors. It would remove speculators who import and horde product in the hope of profiting when the price rises.

I don’t know if this would work, but his comments about the danger to the Indian government of blocking imports long term are wise. Weather is fickle and bumper crops won’t always be there. Supplies from Canada and elsewhere will be a welcome safety net when drought again appears, as it always does.

However, while all this is being resolved, Canadian farmers are starting to produce their seeding plans.

I would not be surprised to see pulse acreage fall by two million acres back to levels common in the early part of this decade.

A significant portion of that will likely go into canola, even if it means pushing rotations.

Farmers produced a record canola crop in 2017, but demand is good. Exports are ahead of last year, and domestic crush is about the same year over year. Year-end stocks are expected to rise from last crop year but are not expected to be particularly burdensome.

The current cash price is $10 to $15 a tonne higher than at the same time last year, and that is with a loonie that is trading around US80 cents, about four cents stronger than last year at this time.

Last year canola rallied in the January to March quarter, partly because of a falling loonie and strong exports. Cash prices were attractive, near $500 a tonne in mid-March. That helped farmers decide to boost acreage.

Will we see a similar rally this year?

I think no one can accurately predict the direction of the Canadian dollar.

All I can note is that for the past two months job creation in Canada has been much stronger than expected and the jobless rate dipped to a 41-year low of 5.7 percent.

The expectations for the Bank of Canada to raise interest rates this month are rising, and stronger interest rates usually mean a stronger dollar.

There is still a concern about moisture in Argentina’s soybean crop, but Brazil seems to be doing well. A record U.S. soybean seeded area is expected because corn is unprofitable for many.

Wheat is a seeding alternative. Its price is tethered by ample global supply, but if current dry weather in the U.S. Plains continues and the recent bitter cold actually does lead to winterkill in Kansas, there is potential for a short-term price rally that could draw more land into spring wheat.