Pulse crop exporters are starting to climb out of a heap of cancelled shipments.
Importers in countries including China, Turkey and India refused to accept delivery of pulses during the fall and winter of 2008.
Shortly after the global financial crisis hit in September, pulse prices fell $300 to $400 per tonne from the values negotiated in the spring, making customers reluctant to follow through on their commitments.
The rally of the American dollar, which saw currencies like the Brazilian real weaken by 45 percent compared to the U.S. dollar, didn’t help matters. It forced importers to come up with more local currency to pay for already over-priced shipments.
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The upshot was that buyers took a hard-line position with Canadian shippers, refusing to pick up thousands of containers unless prices were drastically reduced.
“In the 20-some years that we’ve been in the business I’ve never seen anything so massive,” said Dave Walker, general manager of Walker Seeds Ltd., one of Canada’s largest special crop processing and exporting firms.
Crop movement came to a grinding halt as exporters worked their way through the cancellations by renegotiating deals or finding alternative destinations for what Walker estimates was in excess of 50,000 tonnes of product stored in more than 2,000 containers.
The slowdown in sales was exacerbated by the strong 2007-08 export program, which saw importers continually buying out of fear that prices would only be higher next week or next month.
That super-charged buying behaviour led to a build-up of pulse crop inventories in India and other key destinations, allowing buyers to adopt a wait-and-see approach with the 2008-09 sales program.
“We probably have to go another month yet before some of these countries get back to what they deem as normal purchasing,” said Walker.
The good news is that the industry has worked through the bulk of the backlog of cancelled shipments and exports are starting to flow again to some destinations as inventories dwindle. Walker said that bodes well for pulse prices.
“We’re hoping that we’ve seen a bottom on these prices, or at least going forward we would expect prices to be more sideways,” he said.
That reversal appears to have begun late last week when red lentil prices shot up to 31 cents a pound, yellow pea bids reached about $5.26 per bushel and yellow mustard prices were about 43.75 cents a lb.
An end to the free fall in special crops prices should give buyers the confidence they need to step in and make some long-awaited purchases early in 2009.
Another bullish factor in pulse markets is that questions are emerging about 2009 crop conditions in important pulse growing regions such as Turkey and India.
India’s rabi season crop is in the ground and is two million acres larger than last year’s crop, but there are some early warning signs that growing conditions might be less than ideal.
“We haven’t received anything specific from India that indicates their crop might be in a bit of trouble but we’re beginning to think their crop is not necessarily a normal crop,” said Walker.
He is basing that assumption on the fact that the trade is seeing increased buying interest from that region of the world.
Even if there is a strong export program to India and other pulse buying countries from now until the end of the 2008-09 marketing year, Walker still expects to see some larger carryout levels for crops like peas and red lentils due to the slow start to the sales program and the better than expected Canadian harvest.
