A new Statistics Canada stocks report indicates pea and lentil carryout could be higher than previously expected, says a pulse crop analyst.
Stat Publishingeditor Brian Clancey is particularly concerned about the record 1.12 million tonnes of lentils on hand as of March 31.
That means 44 percent of the crop was sold during the first eight months of the 2010-11 marketing campaign, the worst performance since lentils have been included in the report.
An average disappearance for the remainder of the marketing year would result in 796,600 tonnes of lentils in the system, which is well above the 450,000 tonnes Agriculture Canada was forecasting before the stocks report.
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Clancey had been wondering prior to the report what farmers were going to do with their poor quality lentils. The answer appears to be nothing just yet.
“There’s no reason for the stocks to be this high. There is a large fraction of the crop that is only suitable for livestock feed,” he said.
Clancey said farmers are reluctant to recognize that their lentils are worth less than 10 cents a pound.
However, moving crop into the domestic feed market is complicated by the fact that No. 3 lentils are priced well above feed peas.
They need to be sold at a discount to feed peas to generate interest in the livestock sector.
Clancey recently returned from an international pulse conference where lentil buyers worried that Canadian growers and processors will be tempted to blend last year’s crop with this year’s production as the carry-out builds.
“It scares the pants off a lot of buyers. That could really slow down business for a long time,” he said.
The pea outlook isn’t nearly as dire as lentils because of a record 2.3 million tonnes of sales during the first eight months of the marketing year.
Statistics Canada estimates 1.35 million tonnes of stocks on hand as of March 31, which Clancey said was about 150,000 tonnes more than the market was anticipating.
Assuming average disappearance, stocks should fall to 350,000 tonnes by the end of the 2010-11 marketing campaign.
“The only negative in the pea market is that the Indian demand is clearly slowing down,” said Clancey.
Reduced demand creates the potential that carryout could reach 500,000 tonnes, up from Agriculture Canada’s pre-report estimate of 300,000 tonnes.
However, rising yellow pea demand in Pakistan and China could offset the slowdown in Indian imports, resulting in the more favourable 300,000 tonne carry out number.
The report also said that farmers had delivered 1.84 million tonnes of peas to primary elevators, up from 988,100 tonnes in the same time last year.
The big grain companies’ market share has jumped to 83 percent from 56 percent last year.
“That was surprising,” said Clancey. “You just start looking at things and calculating and you realize how gigantic it is. I hadn’t really been paying a lot of attention to that shift.”
A lot of bulk pea business has been done in India this year and companies such as Viterra and Patterson Grain are suited to deliver that type of product.
Clancey said the sudden emergence of the big grain companies in pea markets means growers can deliver their peas to the same place where they take their wheat and canola. This gives them more competition for their product and faster payment for their peas.
