Grain traders forecast hike in pea and lentil acres this year due to strong demand
Pulse processors will be running out of product this summer.
A brisk export program has led to dwindling North American supplies, said Murad Al-Katib, president of AGT Food and Ingredients.
Canada shipped 2.11 million tonnes of peas and 1.35 million tonnes of lentils between Aug. 1 and Feb. 28, up from 1.65 million tonnes of peas and 990,000 tonnes of lentils for the same period the previous year.
“The bad news on that is it’s likely that we’re going to see two to four weeks at the end of quarter two and maybe a few weeks in quarter three where product is going to become in tight supply,” he told investment analysts during a conference call about the company’s 2014 results.
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The slowdown in grower deliveries is expected to happen in June and July. He said AGT’s plants in Turkey, India and Australia should be busy during the period, which will help offset the slowdown in the North American facilities.
“So I’m not sounding any alarm bells. I think there will be a modest effect in those particular quarters,” said Al-Katib.
The good news is that the company is projecting a big new crop of pulses this year.He is forecasting a 15 percent increase in Canadian lentil acreage, which is in line with what analysts are expecting.
Al-Katib expects a similar increase in pea plantings, which is well above what others are anticipating.
“With the earlier spring that people are forecasting and strong prices, we could see acres go up even higher,” he said.
Marlene Boersch, managing partner in Mercantile Consulting Venture, is forecasting a minimum 10 percent hike in pea plantings.
Chuck Penner, analyst with LeftField Commodity Research, is calling for a seven percent increase.
Brian Clancey, editor of Stat Publishing, is forecasting six percent more peas.
Agriculture Canada’s first estimate of the year was for a four percent bump.
Al-Katib is not concerned about moving a big crop in 2015-16.
“We expect demand to be very strong,” he said.
India’s crop “doesn’t look good” because of late season rain. He expects the world’s top pulse importer to be in the market at the same or higher level as 2014-15, during which it is expected to buy four million tonnes of pulses from abroad.
The Middle East will also be a strong customer. Turkey is expected to produce 400,000 tonnes of lentils, which is the new norm for a country that used to produce a lot more.
Civil war in Syria and conflict with the Islamic military group ISIS in Iraq has been good for pulse crop demand as governments try to keep their people fed to fend off further civil unrest.
“There’s a lot of efforts to make sure tummies are full right now,” said Al-Katib.
Another good sign for pulse demand is that the United Nations has declared 2016 the International Year of Pulses.
Al-Katib told the analysts they should look back to 2013, when the UN declared it the International Year of Quinoa, to see what kind of impact that can have on demand for a commodity.
“(Quinoa) has become a wide-scale consumed product that went from obscurity to the vocabulary of mainstream North American and Western European consumers,” he said.
“We are hopeful that there will be a similar effect on pulses. Food companies are getting ready for that.”
Food manufacturers are already lining up supplies so they can have new pulse-based food products ready to launch next year.
Al-Katib told analysts that strong demand and increased supply will see AGT’s processing plants operating at more than 80 percent capacity this year, up from 77 percent last year and 50 percent in 2012.
He was confident AGT will continue to gain market share.
“Our reputation at the farm level is very high,” said Al-Katib.
He said that comes from a decade of providing growers with the right information, accepting product at multiple delivery locations and paying them on time.
