Canada’s lentil industry is heading for a major shakeup, says one of the world’s leading pulse traders.
“There is lots of turbulence coming in the supply chain,” said Peter Wilson, global supply chain manager for JK International Pty Ltd., a Brisbane, Australia, firm with assets and dealings in Canada.
Big grain companies are elbowing their way into a business that has been the domain of smaller pulse processors.
Companies including Viterra and Richardson International Limited handle a small portion of the crop today. Wilson believes their share is likely less than 10 percent of the lentil pie.
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But there is a growing interest in the red lentil sector by the grain-moving behemoths that reminds Wilson of when they turned their attention to yellow peas a decade ago.
“They were probably handling maybe 20, 30 or 40 percent (of the yellow pea crop.) The line companies now between them would handle 90 percent,” he said.
Grain companies operating in Western Canada can’t afford to ignore a crop that has taken three million acres of production out of their grasp, he said.
Murad Al-Katib, president of Regina’s Alliance Grain Traders, the largest lentil and pea splitting company in the world, thinks the grain elevator company interest in the sector is fleeting.
The firms are struggling with the prospect of handling vastly reduced wheat and canola crops this fall, so lentils seem rather enticing.
“We have a bigger acreage and a bigger tonnage (than normal) and grain companies are driven by volume,” said Al-Katib.
But he doesn’t buy the notion that grain companies have a sustained interest in the lentil sector.
Companies including Alliance, Walker Seeds and Simpson Seeds are continually investing in more sophisticated processing equipment because customer quality specifications are rising, not falling.
“This isn’t a bulk commodity,” said Al-Katib.
Ray Craswell, a red lentil grower from Strasbourg, Sask., doesn’t like the idea of elevator companies taking over the business.
“As long as there’s enough Saskcans (now Alliance) or Walkers or whoever around, I’m not going to be selling to Viterra,” he said.
He believes Canada’s reputation as a supplier of quality lentils would be tarnished if more product started moving out in bulk.
Wilson said most of the lentil trade once moved in bulk and there is no reason it can’t do so again.
He knows of bulk red lentil shipments moving through Thunder Bay into markets in Egypt and Turkey and he heard no reports of quality concerns from buyers in those countries.
The big strategic advantage for the line companies is that there is a sizable spread between bulk and container freight in today’s marketplace.
Bulk transportation from Canada to India costs a shipper about $55 per tonne. To move the same product by container would cost about $100 per tonne plus another $10 to $20 per tonne in stuffing costs and extra administration fees.
JK International deals in India, Pakistan, Bangladesh and Sri Lanka. Wilson finds it increasingly difficult to meet customer needs using the traditional supply chain.
“We don’t have any of our buyers saying, ‘We want to spend an extra $50 or $60 a tonne,’” he said.
Al-Katib said the line companies are “talking big talk” about getting into the lentil industry but when container freight rates narrow the gap with bulk rates, he believes things will return to normal.
