China has taken over from India as a major buyer from Canada, but that means prices could improve later in the year
China appears eager to buy new crop peas from Canada, and that’s a blessing because India will likely be completely out of the market, says an analyst.
Canada shipped 750,000 tonnes of bulk peas in August, according to the Canadian Grain Commission. That is up from 448,000 tonnes a year ago.
It appears like a lot of those peas are heading to China.
“We have a very good vessel lineup on the West Coast,” said Marlene Boersch, managing partner of Mercantile Consulting Venture.
“In fact, I don’t understand why our pace isn’t a little higher yet in terms of shipping.”
China imported 2.2 million tonnes of Canadian peas in 2019-20, accounting for 61 percent of total shipments.
Boersch expects a slightly smaller sales program in 2020-21 but the Asian giant should still be the top customer by a long shot.
China has been the salvation for Canada’s pea industry at a time when its former number one customer has exited the market.
She isn’t forecasting any sales to India in 2020-21.
Chuck Penner, analyst with LeftField Commodity Research, said the shift in export destinations to China from India has some price implications for Canadian farmers.
India typically purchased a lot of peas straight off the combine in the August through October period, he said in a recent article he wrote for Alberta Pulse Growers.
China tends to spread its purchases out over the entire year.
That shift is resulting in fewer opportunities to forward contract yellow peas and more pronounced post-harvest seasonal lows.
However, it is also leading to better pricing opportunities later in the crop year, suggesting farmers might want to exercise more patience with their marketing plans, said Penner.
Statistics Canada is forecasting a record five million tonnes of production and another 233,000 tonnes of old crop carryout.
Boersch believes production will be closer to 4.75 million tonnes because of some disappointing yields in the northern Prairies.
She thinks pea supplies will get tight again by the end of 2020-21 due to another strong year of exports and rising domestic demand for the commodity.
“We’re looking at another constructive year,” she said.
China is once again using Canadian peas as a feed ingredient, and that is critically important because it ties pea prices to the broader agriculture commodity market, which has been doing well of late because of China’s increased imports of U.S. corn and soybeans.
That should lend support to yellow pea prices.
“I think we belong around the $7 (per bushel) range,” said Boersch.
Peas need to be near that level to be profitable and to be competitive with strong canola values.
“If you want to keep pea acres up then we need half-decent prices,” she said.
There is some market risk associated with being so heavily reliant on a customer that has severely restricted sales of Canadian canola, Australian barley and U.S. sorghum because of political conflict.
“It’s always a little bit tricky. It makes me a little bit nervous,” said Boersch.
However, Canada supplies 95 percent of China’s pea imports and it would be hard to replace that volume from other destinations.
The green pea price premium is expected to narrow in 2020-21 because farmers grew more of that crop. Boersch thinks they produced something in the low-800,000 tonne range, up from 640,000 tonnes last year.
She estimates farmers produced 3.7 million tonnes of yellow peas. There will be good demand for that crop from places other than China.
Bangladesh has been the second biggest buyer of Canadian peas in recent years, and Boersch expects another strong export campaign to that country because of flooding problems caused by excessive monsoon rains.
She doesn’t have any sales allocated to India, but that could change depending on how the upcoming rabi (winter) chickpea crop turns out.
“If you were to all of the sudden export some stuff into India, that makes things tight,” said Boersch.
Another factor to consider this year is the new domestic demand created by the opening of fractionation plants, such as the Roquette pea protein plant in Portage la Prairie, Man.
She is forecasting 900,000 tonnes of domestic demand, about half of which will come from fractionation plants.