Canadian peas still going to China

Despite a dispute with China that has shut down canola exports, the Asian country is now the top buyer of Canadian peas

Canadian pea exporters are not avoiding the Chinese market in the wake of that country shutting down Canadian canola seed shipments.

“I haven’t heard any of that,” said Carl Potts, executive director of Saskatchewan Pulse Growers.

He said there has been no indication from the Chinese government or buyers of restrictions on pea imports and that’s a good thing because China has become Canada’s top pea market by a long shot.

A United States Department of Agriculture report on pulse demand in China forecasts 2.1 million tonnes of total pea imports in 2018-19, up 10 percent from the previous year. Canada will supply about 90 percent of that business.

Part of the reason for the surge in business is that peas are finding their way into hog rations. Potts estimates China’s livestock sector consumed between 300,000 and 400,000 tonnes of feed peas in 2018.

“The feed pea demand will really be driven by economics and relative prices for other feed ingredients,” he said.

Peas didn’t work in livestock rations when India was in the market and prices were higher. But prices crashed in the fall of 2017 when India implemented a 50 percent import tariff on peas.

The export price of Canadian yellow peas to China fell to US$253 per ton in August 2018, down 17 percent from October 2017.

“Now we’re seeing them pencil in a little bit more,” said Potts.

Now that livestock manufacturers are familiar with the ingredient and know how to source peas he believes the demand will be there when the price is right.

Most of the Chinese pea demand still stems from food markets. Peas are fractionated into starch, protein and fibre, which are used in health foods and food ingredients.

The starch is used to make vermicelli and other noodles. The protein and fibre are incorporated into nutrition and health food products.

“Rising incomes and greater awareness about the health benefits of high fibre and protein diets have promoted pulse demand,” stated the USDA report.

But it noted there is also growing demand for peas in China’s livestock sector as a substitute for soybean meal.

Dried peas are lower in protein but higher in energy than soybean meal. Peas are 25 percent protein compared to 43 to 49 percent for soybean meal.

“Due to their high energy content they can also substitute for corn in many feed formulations,” stated the report.

The USDA appears to believe that the use of peas in livestock rations in China isn’t temporary.

“Pulse demand for livestock feed use continues to follow overall demand growth for animal protein products. Pulses are gaining visibility as a partial feed substitute for soybean meal in China,” stated the report.

Greg Kostal, an analyst with Kostal Ag Consulting, believes food pea demand in China will continue to grow at a clip of about 200,000 tonnes per year but the recent feed pea demand was “opportunistic” and unlikely to last.

“It ultimately comes down to price,” he said.

Feed pea sales to China first started to take off in 2017-18 when Argentina had a disappointing soybean harvest. The momentum was sustained in 2018-19 when China slapped the 25 percent tariff on U.S. soybeans.

“You can’t count on that going forward,” said Kostal.

Once China and the U.S. hash out their differences and Canadian pea trade to India resumes, peas will likely be priced out of hog rations, he said.

Chinese buyers that liked peas at $6 to $6.50 per bushel might not at $7 to $7.50.

Kostal is also concerned about the toll African swine fever is taking on China’s hog herd. Rabobank estimates China’s sow herd could be reduced by 20 percent or seven million sows.

That would kill feed demand for all sorts of commodities.

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