Large carryout in 2012-13 | Pulse processor says lentil acres must fall below two million acres to increase prices
Lentil acres will be down in 2013, which analysts say is a good thing because there will be way too much carryout from last year’s harvest.
Marlene Boersch, co-founder of Mercantile Consulting Venture Inc, forecasts a 15 to 20 percent reduction in acreage, which would result in 2.01 to 2.14 million acres of the crop, down from 2.46 million last year.
Boersch was more confident in her forecast when she first crunched the numbers back in December because the forward price for wheat was more than $9 a bushel at that time. Wheat prices have since fallen by $1 to $1.25 a bushel.
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David Nobbs, general manager of Canpulse Foods, a pulse processor in Kindersley, Sask., said lentil acreage must drop below two million acres to get any positive price action.
Logic would suggest growers will cut acreage. Statistics Canada forecasts 614,000 tonnes of carryout from the 2012-13 crop year, which is a cumbersome 40 percent stocks-to-use ratio.
However, Nobbs reminded growers attending the pulse portion of Crop Production Week that it was the identical situation when they gathered in Saskatoon at the same time last year.
Farmers had planted 2.5 million acres of lentils in 2011 and everyone anticipated a drop to two million acres in 2012 because of the large carryout. That didn’t happen. Instead, growers planted the exact same amount.
“The farmer in me questions whether or not these acres are going to come down,” he said.
The good news is that Nobbs and Boersch think Statistics Canada’s 2012-13 carryout forecast is too high.
Nobbs saw more root rot damage in 2012 than he has seen in the last 20 years. There were a lot of 10 bu. per acre crops in Saskatchewan’s Saskatoon- Rosetown- Kenaston triangle.
He thinks carryout could be overstated by 100,000 tonnes but it’s still going to be a big number, which is why prices are around 20 cent per pound without much prospect of moving higher.
Fortunately, India was a big buyer of red lentils during the first quarter of 2012-13 because of concerns about monsoon rains and a two million tonne shortfall in its kharif (summer) pulse production.
Buying slowed after the revival of monsoon rains.
Turkey hasn’t been a big buyer of Canadian lentils, which indicates there are no serious concerns about the Turkish red lentil crop harvested in June. Prices will largely depend on what happens with that crop.
Nobbs anticipates there will be more red lentil sellers in the next four to five months because growers sold a lot of wheat straight off the combine this year and are now turning their attention to other crops in their bins.
Despite the forecast for more willing sellers, prices shouldn’t fall below 18 cents because they are supported by strong feed lentil values.
Nobbs said the trade has used up the poor quality green lentils from a couple of years ago. What remains in the system is No. 2 or better quality.
He said there is a huge range of quality from the bottom of the No. 2 grade to the extra-No. 2, which is almost indistinguishable from the nearly impossible to achieve No. 1 lentil.
“People always say, ‘hey, you manage a facility and you farm, you must get No. 1 every year’,”Nobbs said.
“I’ve never got No. 1 in my life. Just can never quite hit it.”
He said it’s really important for growers to know where their green lentils fit in the broad spectrum of the No. 2 grade.
Demand is strong for green lentils, and growers are supplying all the product the market requires. Nobbs doubts prices for No. 2 green lentils will fall below 18 cents because of the 12 to 13 cent feed lentil floor price.
Boersch said lentil returns pencil out pretty good for 2013. Using a price of 21 cents for large greens and 22 cents for reds should deliver respective returns of $132 and $146 per acre, which is comparable to spring wheat.
