AGT Food and Ingredients blames a nine-month, $38.3 million net loss on an oversupply of pulses in global markets
Lacklustre demand continues to have a profound impact on one of the world’s top pulse processing firms.
AGT Food and Ingredients posted a $38.3 million net loss for the nine months ended Sept. 30, 2018.
Company president Murad Al-Katib recently told investment analysts during a conference call that an oversupply of pulses in global markets is hampering AGT’s ability to execute its business plan.
That isn’t about to change anytime soon. There was ample production of pulses in Canada and the northern tier states in 2018 and crop quality is slightly above average.
“These levels of production in Canada and the United States, coupled with levels of production in India and Turkey that were in the range of normal production in 2018, have continued governmental intervention in markets like India and have slowed commodity trade flows and impacted prices,” Al-Katib said, according to a transcript of his remarks.
India produced 9.22 million tonnes of kharif or summer pulses in 2018, the third biggest kharif crop on record.
Turkey harvested 600,000 tonnes of chickpeas in 2018, a 28 percent increase over the previous year and 320,000 tonnes of red lentils, a 20 percent decrease.
Most of the attention in pulse markets has been focused on India’s import tariffs and quotas but Al-Katib noted that the devaluation of the Turkish lira has hurt sales into what has traditionally been Canada’s second largest market for lentils.
“Economic conditions in Turkey, with volatility in local currency affecting local importers and their ability to access credit and execute purchases destined for regional markets, is another factor that we’re monitoring closely,” he said.
Al-Katib said markets are going to have to factor in the oversupply conditions into their pricing decisions to “materially reduce volumes available in the markets.”
Market recovery has been slower than anticipated but he expects improving conditions to materialize in the second half of 2019 that will lead to better margins and earnings at AGT.
He said he will be keeping a close eye on India’s April elections and on the harvest of the rabi (winter) crop in March.
Indian farmers had planted 21.9 million acres of rabi pulses as of Nov. 23, which is 10 percent below the same time last year and seven percent behind the long-term average.
Al-Katib believes the Indian government’s political agenda shifted in advance of the elections, from a policy aimed at combating food price inflation to one designed to raise crop prices and local farm incomes.
“We believe there could be information that is skewing (the) messaging towards that political agenda,” he said.
As for Turkish politics, he believes President Recep Tayyip Erdogan’s hardline stance regarding the murder of Saudi journalist Jamal Khashoggi has brought him a little closer to the West and helped stabilize the Turkish lira.
One analyst asked Al-Katib if he sees the downturn in pulse markets as an opportunity to pick up market share from competitors.
Al-Katib replied that AGT is the only publicly traded player in the pulse business. The others rely on banks and trade finance credit systems to fund their operations.
“We’re seeing it not only within our competitors but within the importers and customers and distributors around the world, there is a liquidity constraint within the system,” he said.
“As things recover we expect that we’ll again be financially one of the stronger players and we’ll certainly take a look at what we can do to capitalize on that.”