Indian production down | Analyst says strong demand and production challenges should support prices
Green lentil prices continue to improve because of a small North American crop and good demand prospects from India.
Split green lentils can be used as a substitute for pigeon peas, which appear to be in trouble in India.
Official government estimates show Indian farmers had planted 8.25 million acres of pigeon peas as of Aug. 22, down one percent from the long-term average.
Chuck Penner, a grain market analyst with LeftField Commodity Research, tracks planting statistics and believes the real number is closer to eight percent below normal because of dry conditions.
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The state of Maharashtra accounts for one-third of India’s annual pigeon pea production. Monsoon rainfall between June 1 and Aug. 20 was 18 percent below normal in that state.
Karnataka is the next biggest producer. Precipitation has been 24 percent below normal in the northern portion of the state and 15 percent above normal in the south.
Two other key states are Uttar Pradesh and Gujarat. Cumulative rainfall is 53 percent below normal in western Uttar Pradesh and 34 percent below in the east, while Gujarat’s precipitation is 32 percent under the average.
Dryness in the four states that produce more than two-thirds of India’s pigeon peas means India could be in the market for substitutes.
“We’re seeing some solid (green lentil) demand anyway and it might get even bigger this year,” Penner said.
“In fact, (there are) good odds.”
Prices are the best gauge of the emerging market demand.
“I have been watching pigeon pea prices in India, and those have been going fairly solidly higher,” he said.
Green lentil prices are firm but haven’t trended upward in lockstep with pigeon pea prices. Penner expects to see a price response closer to harvest time in October.
India has been a major buyer of Canadian green lentils in the past. In 2008-09, Indian farmers harvested 2.27 million tonnes of the crop, down 26 percent from the previous year. It led to a surge in Canadian green lentil imports.
Penner said strong overseas demand prospects combined with a small and potentially quality-challenged North American crop bodes well for prices.
U.S. farmers planted 320,000 acres of lentils this year, down 31 percent from the previous five-year average. Sixty-five percent of the crop is estimated to be green lentils.
Much of the crop in Montana and North Dakota was exposed to the same untimely late-August rain that swept through southern Saskatchewan and Manitoba, which created quality concerns in those two provinces.
Pete Klaiber, vice-president of marketing with the USA Dry Pea and Lentil Council, said most of the crop was standing in the field when the rain arrived, which has the trade fretting.
“We’re at the crossed-fingers point right now,” he said.
The biggest concerns are wrinkled seeds and poor colour.
“If we end up with significant quality issues on both sides of the border, especially due to these late rains, I think it’s certainly going to firm up the green lentil market,” said Klaiber.
“Those who hold decent quality green lentils are going to be in a good position.”
Penner said prices are already starting to creep up in the United States, just like they have in Canada.
“Prices are rising in the middle of our North American harvest,” he said.
“To me that tells me there is some strong upside potential.”
Penner estimates Canadian green lentil production will be 20 percent lower than last year based on Statistics Canada’s acreage estimates.
Statistics Canada is forecasting average lentil yields of 1,482 pounds per acre. Saskatchewan Agriculture’s first production estimate of the year calls for a provincial average of 1,257 lb. per acre.
“There is potential for production to drop even more than that,” said Penner.
