Sky-high green pea prices will likely prompt overproduction this year, say analysts.
Statistics Canada’s survey of 13,805 farmers shows growers intend to seed 3.43 million acres of peas, up slightly from 3.34 million acres last year.
Seeded area is not broken down by class, but Stat Publishing forecasts a drop in yellow peas to 2.76 million acres from 2.9 million acres and a sizeable increase in green peas to 640,000 acres from 400,000.
Old crop green peas are selling for $17 to $17.50 per bushel, which is almost double the $8.75 to $9.25 price for No. 2 or better yellow peas.
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It’s much higher than the average $1 per bu. premium seen over the previous five years.
“It might be the most profitable crop in Western Canada right now,” said Stat Publishing editor Brian Clancey. However, an acreage increase of the magnitude he is forecasting would quickly shrivel the green pea premium.
And it’s not just a Canadian conundrum. U.S. growers have indicated they intend to plant 31 percent more peas than they did last year with most of the increase expected to be in green peas.
“If other parts of the world grow more green peas, then we’re going to move from a fundamental shortage to an oversupply situation,” said Clancey.
Chuck Penner, analyst with LeftField Commodity Research, thinks acreage will not jump as much as Clancey is forecasting, partly be-cause of a seed shortage.
The Statistics Canada pea number was 200,000 acres lower than Penner was anticipating, causing him to reduce his yellow and green pea acreage estimates.
“I was very bearish on green peas before and now I’m not as bearish.”
Penner said the outlook for significantly more acres in North America should make it easy for growers to decide to lock in some production at new crop prices of around $12 per bu., which is as high as he can re-member for green peas.
“If that’s your worst sale of the year, you’re still in fabulous shape,” he said.
Green peas don’t have as much demand depth as yellow peas. It is hard for the crop to attract demand through lower prices, which means prices could fall sharply if acres are as high as Stat is forecasting.
“I would find it really hard to understand why anyone would consciously carry green peas over into the coming marketing year,” said Clancey.
It’s not often that new crop prices are $5 to $6 per bu. lower than old crop prices.
“That’s a lot of ground to recover,” he said.
Clancey agreed with Penner that growers should consider booking a portion of their anticipated production at today’s new crop values.
The one bullish factor is that green peas are more weather sensitive than yellow peas, and the longer seeding is delayed the bigger the risk that growers will have a tough time producing quality green peas.
