Prairie field pea production could crash this harvest, but prices may
not react the way producers would expect, says special crops market
analyst Brian Clancey.
The feed market for peas won’t bid up prices too high, so producers
will have to rely on selling into the higher-priced food market. There
may be an upside from a needy prairie feedgrains market, but the effect
of that is hard to predict.
Large crops in Europe mean there won’t be demand from Europe for
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Canadian peas. As well, Clancey said European pea exporters have
already been targeting the south Asian food pea market.
“They’re taking demand away from us.”
World feed pea markets aren’t interested in what they consider
overpriced Canadian peas. Pea prices may not be historically high, but
they’re out of line with other feed protein sources on a global basis,
Clancey said.
That could create some interesting dynamics in the western Canadian
market, he said.
“The fact that there’s a general feed shortage is why we don’t think
the western Canadian feed market is going to roll up and disappear.”
People feeding livestock will still be interested in peas, especially
because there will be little canola meal over the winter, Clancey said.
That means there will still be a market for feed peas, but it will be
kept in line by soybean meal, which is plentiful.
Clancey said Saskatchewan Agriculture is forecasting a much smaller
field pea crop than was expected a few months ago. If the Saskatchewan
crop comes in at only 1.1 million tonnes, Canadian production will
probably fall to 1.638 million tonnes from earlier estimates of 1.835
million tonnes.
That will be the smallest crop since 1996.
Drought is the culprit, which means many producers will have short
crops. Clancey said that in itself will create interesting market
behaviour.
A farmer with a crop of 20 bushels per acre can make a profit on a crop
that sells for $7.75 per bu. He’s on easy street if his crop yields
more than 24 bu. per acre.
“This is awesome. Fabulous prices. Huge
returns.”
However, he will only break even on his production costs if his crop
yields 16 bu. per acre. He will lose money if he is hit by drought and
yields fall to 10 bu. per acre.
If that happens, there’s a good chance he will sit tight and refuse to
sell until prices rise.
“Why lose money today when I can lose money tomorrow,” is how Clancey
characterized a reasonable grower approach to the situation.
“I think that’s going to be a real issue out there in Western Canada.”
Clancey said he senses fear from pea processors who may have already
made sales and booked ocean freight.
They appear to be bidding up prices but talking downside potential,
perhaps trying to encourage producers to deliver early.
Clancey acknowledged the prairie field pea market situation is unique,
and he doesn’t know how that will affect world prices.
“Will the world be able to follow Canada up if we light a fire here?”
he asked.
