Rising ending stocks will keep pea prices in the doldrums in 2019-20, says an analyst.
Prices have trended lower in August but that is normal, said Chuck Penner, analyst with LeftField Commodity Research.
“Farmers this time of year, they kind of panic a little bit,” he told delegates attending the 2019 Pulse and Special Crops Convention.
“But a shift lower in prices at this time of year is very normal. We seem to forget,”
Prices usually start to climb again in October but it might not be as big a recovery as usual.
“We’re going to see a move up from seasonal lows but it’s going to be relatively modest,” said Penner.
The situation could have been much worse. Statistics Canada underestimated 2018-19 production by about 350,000 tonnes and exports were sluggish at the beginning of the year.
But the export pace picked up as the crop year transpired and should finish at 3.25 million tonnes, which is ahead of the previous five-year average.
China has picked up a lot of the slack caused by vastly reduced sales to India. Bangladesh has vaulted into second spot with 600,000 tonnes of imports, although Penner expects much of that isn’t staying in the country.
The strong sales program should result in 504,000 tonnes of 2018-19 ending stocks, down from 648,000 tonnes the previous year.
Growers planted 20 percent more peas in 2019 with yellows up 17 percent, greens 35 percent and others 43 percent.
Penner said overseas buyers have been reluctant to book new crop sales and growers are not eager to sell.
“So that could make things a little more exciting,” he said.
He is forecasting 4.5 million tonnes of production due to a five percent increase in yields over last year. That would be the second largest crop on record.
Total supply will be five million tonnes. With an export program of 3.5 million tonnes. With an extra 125,000 tonnes of domestic demand, that will leave 650,000 tonnes of carryout in 2019-20.
That is higher than last year but still what he would considerable comfortable.
Penner said he used conservative export estimates for India and China and another strong program to Bangladesh.
He said the incremental demand that materialized last year when Chinese feed buyers substituted cheap peas for soy meal has largely evaporated. He pegged that demand at 200,000 to 300,000 tonnes.
Jeff Vipond, director of peas, lentils and canaryseed with The Scoular Company, had a much bigger estimate for the incremental demand, in the range of 800,000 to one million tonnes.
He noted that China accounts for about half of Penner’s 3.5 million tonne export estimate, which is worrisome given China is a price sensitive market where demand can evaporate quickly.
Penner doesn’t expect the trend toward plant-based diets to have a big impact on domestic demand in 2019-20. He said that won’t appear until 2020-21.
He hates seeing the emerging divide between the meat sector and the crop sector when the two could be working together on products like a black bean and beef burger.
“It’s disappointing to see the industry attacking itself,” said Penner.
Vipond said the incorporation of pulses in the North American pet food market has been a significant and growing market factor, with inclusion rates as high as 15 percent.
“It has been a lifeline for producers and processors up here in Canada,” he said.