Demand is steady, and the usual harvest delivery pressure hasn’t materialized because of depleted carryout stocks
There is upside potential for green lentil prices, but the outlook for reds is not as good, says an analyst.
“It’s certainly a crop that would be more vulnerable than greens this year into the fall,” Marlene Boersch, managing partner of Mercantile Consulting Venture, told the 500 delegates from 31 countries attending the Canadian Special Crops Association’s virtual annual conference.
That is largely based on reduced export potential for red lentils because of looming competition out of Australia and residual supplies in importing countries from a COVID-19 buying spree.
A couple of days after her presentation India announced it was lowering the import duty on lentils to 10 percent from 30 percent from Sept. 18 through Oct. 31. Boersch said that doesn’t materially change her outlook but it is good news for red lentils.
Statistics Canada estimates Canadian farmers harvested 3.07 million tonnes of the crop this year.
Boersch thinks production is smaller, at 2.96 million tonnes. She has carryout from the 2019-20 crop at a paltry 51,000 tonnes.
Supply will be similar to last year, but she thinks exports will drop to 2.4 million tones, down from 2.86 million tonnes.
Ending stocks will climb to 311,000 tonnes, but that is still well below the 716,000 tonnes seen in 2018-19 and the 873,000 tonnes the year before that.
Elyce Simpson Fraser, senior vice-president of Simpson Seeds, doesn’t appear to think the price for any class of lentils is heading lower.
Demand is steady, but there hasn’t been the usual harvest delivery pressure this year, partly because of depleted carryout stocks.
“We saw growers sell stocks that they’ve been carrying for three to four years,” she said.
And growers are holding on to their new crop lentils in hopes of driving prices above the 30 cents per pound level.
She doesn’t see that attitude changing going forward because farmers are “cash rich” this year and willing to wait out the market.
Simpson Fraser agrees with Boersch’s green lentil price outlook.
“We’re going to be very tight on green stocks, so that should hold prices firm,” she said.
Farhan Adam, chief executive officer of Marina Commodities, is forecasting about 500,000 tonnes of Australian production, a big increase over last year’s 360,000 tonnes.
That means Canada will likely be facing more competition in export markets than last year. However, Australian lentils may not be fetching the usual premium they receive over Canadian lentils.
“This year I think we have fabulous quality (in Canada),” he said.
Australia’s crop is still a few months away from being in the bin.
“If something goes wrong in Australia this market is heading much higher,” he said.
It should be noted that the Australian government estimated 338,000 tonnes of lentil production in its September 2020 crop report.
Australia will provide competition into the Indian Subcontinent. Boersch is forecasting 600,000 tonnes of Canadian export to India, down from 907,000 tonnes last year. But that is a conservative estimate with considerable upside given India’s recent relaxation of duties.
Adam said lentils are likely going to be the least favourite pulse for Indian farmers to grow in the upcoming rabi (winter) season due to low predicted returns. That should result in “continuous demand” for the commodity as the year unfolds.
Turkey has been actively bidding on lentils, but the prices are too low to attract any business.
Adam expects reduced export competition in that market from Kazakhstan because of a 100,000 tonne reduction in production in that country. As well, last year’s crop wasn’t big to begin with.
Boersch expects Canada to ship 400,000 tonnes to Turkey, down from 423,000 tonnes last year but much higher than 2018-19 levels of 122,000 tonnes.
She is forecasting 225,000 tonnes in sales to the United Arab Emirates, down from 265,000 tonnes, and 200,000 tonnes in exports to Pakistan, well below last year’s 250,000 tonnes.