Mid-harvest rain downgraded what was expected to be a top quality prairie lentil crop.
“There is going to be a lot more Extra 3s and borderline No. 2s than everybody thought,” said David Smythe, trader with C.B. Constantini Ltd.
Before the poorly timed rain, the trade was expecting 85 to 90 percent of the crop to fall in the top two grades.
Smythe estimates the number is now closer to 70 percent with some of it just barely making the No. 2 grade.
“It’s still usable quality but it’s right on the edge,” he said.
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Prices for No. 2 crimson lentils range from 31.5 to 35 cents per pound. Smythe hasn’t seen the range that wide in his pulse trading career.
Fortunately, quality is a secondary concern for price sensitive markets like India and Pakistan.
“It will definitely find a home but more of it will go into Southeast Asia as opposed to the Middle East. The Middle East is a little bit finickier,” he said.
Early season demand for red lentils has been strong, especially from Turkey and the Middle East, which had disastrous crops.
But there have also been numerous reports of buyers backing out of deals due to plummeting prices.
Red lentil values that peaked at over 50 cents per lb. this summer have followed all other commodities in a dramatic downward slide this fall. No. 1 reds were selling for 34 cents per lb. delivered last week.
Smythe believes prices have bottomed out. A Canadian dollar that fell nine cents between Oct. 1 and Oct. 20 is partially responsible for stopping the slide.
He isn’t predicting a huge price rebound for reds or greens, although the upside potential for greens is slightly better.
“The reds have come down a lot faster than the greens have,” he said.
Growers harvested 433,000 tonnes of red lentils this year, up 82 percent from 2007, according to Stat Publishing.
By contrast, green lentil production remained static at an estimated 461,000 tonnes, up seven percent from last year.
Smythe believes No. 1 greens could touch 40 cents but it may take until March or April for that to occur. No. 2 greens could have a tough time breaking 35 cents. He doesn’t see red lentil prices firming up much beyond where they are right now.
But as with everything in today’s turbulent commodity markets, there are many factors that would cause him to rethink those forecasts.
Gazing out to next spring, he sees declining lentil acreage.
When oil was selling for $147 US a barrel, the prevailing thought was 2009 pulse acreage would be way up because of soaring fertilizer costs. Sentiments are changing now that oil has dipped below $70 a barrel.
“(Pulses) have definitely lost a bit of gusto,” said Smythe.
“I think you’re going to see lentil acreage down a bit.”
But he believes pea acreage won’t soften because even at $5 or $6 per bu. farmers are making money and there should be good opportunities for peas in feed markets.
