Lentil importers are curtailing purchases because of falling prices and strong global production prospects, says the president of the world’s largest lentil processing company.
During a conference call about his company’s financial results for the quarter ended March 31, Alliance Grain Traders Inc. president Murad Al-Katib said buyers are filling only their basic needs. They don’t want to be caught holding large stocks if prices fall further.
Importers are nervous about a record 3.39 million North American acres in 2010, the return to normal production levels in Turkey and adequate moisture in Australia.
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Al-Katib stressed that demand fundamentals are strong, but the gap must narrow between old crop and new crop lentil prices to reignite sales.
“I think you’re definitely going to see that convergence happen in the next 30 days,” he said.
Prices have already fallen. Old crop lentils were selling for 30 cents per pound 45 days ago, while new crop contracts were 20 cents.
Old crop values have fallen to 24 or 25 cents per lb., while new crop values haven’t budged. Al-Katib expects that trend to continue for the rest of the 2009-10 crop year.
He told investment analysts not to be concerned by weaker sales in the pending second quarter results.
“It’s just a temporary postponement of the eventual demand.”
Sales volumes will pick up in the second half of the year, once Canada’s crop is harvested and ready for export.
“We’re still viewing a very strong year ahead of us,” he said.
Al-Katib had similar words of comfort for growers, despite the prospect of falling prices.
“I’m still very optimistic, though, that lentils are going to remain a very profitable crop for growers,” he said.
