REGINA — Traders and analysts believe red lentil prices have bottomed out but greens still have a ways to go.
Vishal Vijay, head of business development with Agrocorp International, doesn’t think red lentil prices will fall below current levels of 15 to 15 1/2 cents per pound.
“This is getting pretty close to the bottom of the bucket,” he told delegates attending the 2018 Pulse and Special Crops Convention.
“I don’t think we’re going to see it drop too far below this.”
Chuck Penner, analyst with LeftField Commodity Research, agrees and is forecasting a gradual price appreciation during the second half of the 2018-19 crop year despite a large crop on the way.
Canadian farmers planted 3.8 million acres of lentils this spring, a 14 percent reduction from the previous year.
However, production is forecast at 2.4 million tonnes, which is only a five percent drop from last year due to a return to average yields.
Penner forecasts 1.4 million tonnes of reds in addition to 762,000 tonnes of carry-in, for a bulky total supply of 2.17 million tonnes.
But he also forecasts a robust 1.28 million tonnes of exports, up from 900,000 tonnes in 2017-18.
He believes India will return to the market in the latter half of 2018-19 and that low prices will stimulate increased demand from markets like Bangladesh, Pakistan and Sri Lanka. Mexico has also emerged as a new buyer of Canadian lentils.
And there will be less competition from Australia due to a smaller crop in that country. Growers are expected to harvest 385,000 tonnes of reds, down 17 percent from 2017-18.
Canadian carryout is forecast at 462,000 tonnes, down 300,000 tonnes from the current crop year.
“That’s still not tight but it’s a little less cumbersome,” said Penner.
Vijay was skeptical of Penner’s production estimate. Agrocorp is forecasting one million tonnes of reds.
But he too believes India could be back in the lentil market in 2018-19 because it appears the country will have a 250,000 to 300,000 tonne shortfall of supply.
Vijay said there is considerable interest in Canadian lentils at today’s prices but buyers are holding off over concern about a rumour that the Indian government may raise the lentil import tariff to 60 percent from 40 percent.
Penner wasn’t nearly as optimistic about the outlook for green lentils. Farmers planted 1.73 million acres and are expected to harvest the biggest crop in five years.
He forecasts 1.04 million tonnes of production and 1.11 million tonnes of total supply.
Unfortunately, green lentil demand is static, so exports will be about 695,000 tonnes, which is similar to 2017-18.
Carryout is expected to blossom to 313,000 tonnes, up from 48,000 tonnes in the current crop year.
That means green lentil prices are likely to drift down toward where red lentil prices are today, he said.
It doesn’t help that the United States is expecting a big green lentil crop as well.
Tim McGreevy, chief executive officer of the USA Dry Pea and Lentil Council, said growers planted 789,000 acres of mostly medium green lentils this spring, down 29 percent from last year.
However, production is forecast at 400,000 tonnes, an 18 percent increase over last year. Timely rains have vastly improved the fate of this year’s crop over last-year’s drought-ravaged harvest.
McGreevy said the U.S. green lentil crop will be competing with Canadian green lentils in many of the same markets.