Pulse predictions | Greg Kostal tells producers to sell today and to postpone contracting acres to await Indian crop news
Greg Kostal wouldn’t be in a rush to lock in new crop pea values.
However, the analyst would certainly consider selling some product at today’s spot prices because the outlook for the crop is bearish.
He is forecasting that corn and meal prices will sag in the last half of 2013, which could drag yellow pea prices below $7 per bushel from today’s $8.75 to $9.00 a bu.
“I’d be a seller at these types of numbers,” the president of Kostal Ag Consulting told the pulse portion of Crop Production Week in Saskatoon.
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Buyers were offering new crop yellow pea contracts of $7.50 to $7.60 per bu. at the Crop Production Show across town.
Kostal advised farmers to hold off contracting acreage at those values until they have a better sense where corn prices are heading and what’s happening with India’s weather.
It is dry in northwestern India, where 75 percent of the country’s winter chickpea and lentil crops are grown. A continuation of dry weather through February might cause a “mini panic” that could boost yellow pea prices.
Indian farmers are planting a big rabi (winter) chickpea crop, which would be bearish for pea prices if the country receives some rain.
Another bearish factor is the 750,000 tonnes of chickpeas recently harvested in Australia, which is well above the previous 10-year average. That is driving down chickpea prices in India and narrowing the price advantage that Canadian yellow peas have over chickpeas.
Kostal forecasts 2013 will see a five to eight percent increase over the 3.25 million acres of peas Canadian farmers planted last year, resulting in three to 3.25 million tonnes of production, up from 2.83 million tonnes in 2012-13.
Quinton Stewart, a pulse crop trader with Viterra, is forecasting 3.6 million acres of peas, with 85 to 87 percent of that comprising yellows.
Old crop prices have been bolstered by India and China’s return to the market and a lack of export competition. Shippers in the Black Sea region have sold all their peas, and France’s crop is being consumed domestically.
“We are the only game in town,” he said.
Stewart believes there were three million tonnes of yellow peas produced in 2012, which is higher than Statistics Canada’s 2.5 million tonne estimate. That means carryout will be higher than forecast.
“That will limit the (price) upside,” he said.
Stewart is forecasting a 1.1 to 1.5 million tonne export program to India, up from the norm of one million tonnes. Sales to China will likely be in the 500,000 to 600,000 tonne range, which is below earlier expectations of 700,000 tonnes partly because of excessive rain in Vancouver that has delayed sales.
He encouraged growers to book some new crop because increased 2013 plantings and higher-than-reported 2012 production could weigh down prices.
Stewart also disagreed with Statistics Canada’s green pea production number. He believes it should be 300,000 tonnes instead of 330,000.
“There just aren’t any green peas out there,” he said.
Strong export movement, a poor Argentine crop and low Canadian supplies have pushed old crop prices to $15 a bushel versus $10 new crop bids.
Stewart said buyers in India and China are balking at today’s values. The only customers are high-end markets in Europe.
“You could very well see old crop values trend towards new crop,” he said.
Kostal said growers need to start replenishing green pea supplies next year. The market needs 500,000 tonnes of No. 2 or better green peas out of North America.
Kostal is nervous about large caliber kabuli chickpea values. Supplies are tight, but a fix lies ahead.
He anticipates a good crop of nine millimetre Mexican kabuli chickpeas because of decent rainfall in the state of Sinaloa, Mexico’s prime chickpea growing area.
That product will hit the market starting in April. Kostal anticipates Frontier chickpea prices will drop to the 25 to 35 cents per pound range, which is at the bottom end of where prices have been since 1999.
There is plenty of grower interest in planting kabuli chickpeas, but Kostal said it will be dangerous if total chickpea production reaches 250,000 tonnes, up from 158,000 tonnes last year.
Stewart agreed the outlook for chickpeas isn’t great, given the huge Australian harvest and the potential for a big crop in India if it gets rain.
“As we get into the summer months, you will see that values will sag,” he said.
