India is forecasting a normal monsoon rain season in 2018, which would be bad for pea and lentil demand, but there is a developing market factor that could rescue peas.
The India Meteorological Department forecasts that the 2018 southwest monsoon seasonal rainfall will be 97 percent of the long-term average. The monsoon season runs from June through September.
Drew Lerner, president of World Weather Inc., agrees with that outlook.
“We’re certainly not expecting any problems either,” he said.
Australia has declared that La Nina is dead and the world has entered a neutral ENSO (El Nino-Southern Oscillation) phase. The U.S. hasn’t killed off La Nina yet but believes it will be neutral by May.
Lerner has studied years where La Nina has abated in the first quarter and turned neutral for the growing season.
“What that study found was that rainfall in India tended to be near to above average,” he said.
Marlene Boersch, managing partner with Mercantile Consulting Venture, said if India has a good monsoon, it can likely last well into winter without requiring major pulse imports. That wouldn’t be good for already depressed pulse markets.
But there is a new source of demand emerging for Canadian peas that could help offset the potentially reduced India demand in 2018-2019.
China is starting to import Canadian peas for feed in the midst of a burgeoning trade war with the United States that has seen the country threaten to place a 25 percent tariff on U.S. soybeans, corn, sorghum and distillers grains.
So far, it is just a threat of retaliatory duties in response to U.S. President Donald Trump directing his top trade representative to level US$50 billion of duties on Chinese goods.
But last week, China slapped a 179 percent duty on U.S. sorghum. And there have been tariffs on U.S. distillers grains since 2016.
Boersch said all of the protectionist measures and threats have Chinese feed manufacturers searching for alternative ingredients, and peas are starting to move into that market.
Until now, Canadian peas have been used for making vermicelli noodles and other human food products in China.
Chinese feed manufacturers have been reluctant to use peas in part because with India in the market they were worried about supply shortfalls.
But with India temporarily out of the market there is plenty of supply and pea protein is cheaper than soybean meal.
Boersch is following what is happening in China’s feed market because it has the potential to mop up the peas that normally would have gone to India.
“If they get going in style they have the capacity to displace India as the major buyer and take care of most of the shortfall,” she said.
That could be bad news for Indian buyers if the 2018 monsoon rains turn out to be disappointing.
“If things start going awry they have really shot themselves in the foot,” said Boersch.
While she is feeling better about the outlook for peas, Boersch remains concerned about Canada’s other top pulse crop.
“I’m still worried about the lentils on the red lentil side. I don’t know what to do about that,” she said.