Poor rainfall in India is expected to reduce pulse yields, which may prompt the government to lift import tariffs
The doom and gloom that has shadowed pulse markets for years appears to be lifting, says a market analyst.
“Even within the last couple of weeks some of that tone has disappeared,” Chuck Penner, analyst with LeftField Commodity Research, told producers attending CropSphere 2019.
He is especially optimistic about the pea market, partly because it looks like India will harvest a disappointing rabi crop.
Indian farmers had planted 36.8 million acres of pulses as of Jan. 18, down from 39 million acres the same time a year earlier.
But it is the yield potential that could really hurt production prospects for the world’s biggest pulse producer.
Rabi season rainfall has been abysmal. For instance, Madhya Pradesh, which is a key pulse growing state, received eight millimetres of rain between Oct. 1 and Dec. 31, which is about 10 percent of normal.
Penner is forecasting 12.5 million tonnes of rabi pulse production, down from 16 million tonnes in 2017-18.
That could lead to the removal of import tariffs and quotas in the Indian market but not until the general elections are over in May.
If India suddenly needs pulses Canada is the likely supplier because Australian farmers harvested a measly 300,000 tonnes of chickpeas, down from 1.2 million tonnes the previous year and two million tonnes the year before that.
Penner said you can’t do a pea outlook without talking about India, but China has been the real story this year.
The country’s pea imports, which had been growing at a healthy clip of 200,000 to 400,000 tonnes per year, have exploded in 2018-19.
China will likely purchase two million tonnes of Canadian peas this crop year, up from the previous high of 1.3 million tonnes.
Some suggest that is because China is bringing in peas as a feed substitute for U.S. soybeans, but Penner noted that pea imports were way up long before China slapped a tariff on U.S. soybeans.
He is forecasting three million tonnes of total Canadian pea exports in 2018-19 and that is being conservative on exports to India. Ending stocks are forecast at 336,000 tonnes, which is almost half what it was the previous year.
“Green peas are going to be very tight again at the end of this year,” he said.
There are $7.50 per bushel yellow pea bids, and prices are trending higher. Maple peas are fetching $15 per bu.
Penner is forecasting a 10 to 12 percent increase in pea acres in 2019. There are new crop yellow pea bids of $7 per bu.
“Do I think we can absorb an extra 10 to 12 percent acres this year? Absolutely, and then some,” he said.
He believes India is going to require 1.5 million tonnes of pea imports in 2019-20, which will be challenging if Canadian acres increase only 10 to 12 percent.
“Finding enough product to meet all the Chinese demand and the resurgence in Indian demand is going to be difficult,” said Penner.
That’s why he is forecasting a price increase in 2019-20.
The lentil picture is “not as rosy,” but there are signs that the worst is behind Canadian producers.
Exports have been underwhelming, but Penner believes they will pick up in the last half of the marketing year.
Lentil bids are two to three cents a pound off their 2018-19 lows, which is enough to get some people thinking more hopefully about the future.
Penner is forecasting 1.98 million tonnes of exports and a carryout of 488,000 tonnes, down from 876,000 tonnes in 2017-18.
He is forecasting a three to five percent increase in lentil acres with new crop bids of 18 to 19 cents per pound for reds.
Penner believes lentil ending stocks will fall to a manageable 242,000 tonnes in 2019-20, partly because of the expectation that India will be back in the market for 750,000 tonnes of imports.
“We’re turning the corner on lentils as well,” he said.
Chickpea production will be going down in India, Mexico, Canada and the United States, which has caused prices to come off their lows by a couple of cents.
Fababean production is sharply down in France, the United Kingdom, Australia and the Baltic countries, which is why growers are seeing $10 per bu. bids.
There were suggestions that Mexico’s dry bean crop is in trouble, but the prices don’t reflect that. However, there could be reduced crops in Brazil and Argentina because of dryness.