Pea prices wait for change in Indian demand

The country’s import quotas and tariffs are still in place, but there are signs they might be easing due to tight supply

Indian demand will be the tipping point in the pea market this year, says an analyst.

Chuck Penner, analyst with LeftField Commodity Research, has penciled in miniscule demand from Canada’s former top customer in 2020-21 due to the country’s punitive import quotas and tariffs.

But there are signs that the country could eventually reduce or temporarily eliminate restrictions.

Yellow pea prices in India have appreciated greatly the last few months, indicating that supplies of the crop are minimal.

What is even more encouraging is that desi chickpea prices are the highest they have been since 2017.

“It’s a signal that the heavy stocks that were being carried over have now been exhausted,” Penner told delegates attending the Canadian Special Crops Association’s virtual annual meeting.

“That has the potential to be a game changer.”

He doesn’t know what odds to put on India returning to the pea market. A lot will depend on the upcoming rabi (winter) season chickpea plantings.

Penner is already “fairly friendly” toward yellow pea prices. If India comes into the market and buys 500,000 tonnes of the crop, it would result in a “very sharp” increase in prices, he said.

Rav Kapoor, chief executive officer of ETG Commodities Inc., doesn’t think India will open the doors to pea imports in 2020-21. He puts the odds at less than five percent.

He acknowledged that desi chickpea prices have been on the rise, but he thinks farmers will plant a big rabi crop of chickpeas and yellow peas in the coming months.

“What we have been hearing on the ground is a lot of lentil-producing regions might move to growing yellow peas,” he said.

If anything, he thinks India could be putting more yellow peas on the market. He believes 100,000 to 150,000 tonnes of cargo that has been stuck in Indian ports will be rerouted to Bangladesh, Pakistan or China for political reasons.

If India was to ease import restrictions and import 200,000 to 500,000 tonnes of peas, it would likely come from the Black Sea region, not Canada, said Kapoor.

Penner said China has stepped up and is now buying more Canadian peas than India did in its prime buying years.

He thinks Chinese imports in 2020-21 could top last year because many of China’s crops have been adversely affected by flooding.

China typically grows about 1.5 million tonnes of yellow peas. He wonders if that will be closer to one million tonnes this year.

Kevin Price, senior export merchant with Parrish and Heimbecker, said China could buy 2.3 to 2.4 million tonnes of Canadian peas this year, up from 2.2 million tonnes last year.

About half of that will go to the fractionation industry and the other half to China’s feed sector, which is an emerging market for peas.

“That’s the new story. They have massive potential demand,” he said.

Plenty of vessels have already been loaded in Vancouver with peas destined for China. He expects trade to settle down to a more steady pace over the next six to eight months.

Price said Chinese feed buyers will trim their purchases once pea prices cross a certain threshold and become uncompetitive with corn and soybeans.

He noted that Chinese fractionation buyers are underbought for this time of year, so they could be sourcing some peas from feed buyers in China.

Penner said total pea demand could outstrip supplies this year.

Statistics Canada estimates Canadian farmers produced 4.4 million tonnes of peas, down from its late-August forecast of five million tonnes.

The crop is about the same size as last year, although there are likely fewer yellow peas and more green peas.

Yellow pea production is down about 30 percent in the U.S., while green pea volume will be up about 11 percent in that country.

Penner said there are also smaller yellow pea crops in Russia and Ukraine, two other major exporting regions.

He expects Canadian yellow pea ending stocks in 2020-21 to be the lowest level in 10 years at around 60,000 tonnes, down from about 150,000 tonnes last year.

That’s why he believes the price lows for the marketing year have already been established and that values will move higher through late-November.

Jeff Vipond, general manager of pulses with Scoular Canada, agreed with that assessment. He thinks farmers have a lot of market power this year because of low carryout stocks from the 2019-20 crop and the fact that many are in a good cash position.

“They’re not eager to market. They’re holding tight,” he said.

Yellow pea prices were in the sub-$6 per bushel range this time last year. Today they are pushing $7 with similar overall supplies.

Farmers are about one-third sold on yellow peas and will probably be one-half sold by the end of December.

Vipond was less optimistic about green pea prices. He thinks growers have been keeping values artificially inflated by refusing to sell.

“I wouldn’t be surprised to see that market trend a little bit lower,” he said.

Penner was also pessimistic about green pea values. He expects the gap between yellow and green prices to narrow as the marketing year unfolds.

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