Pea growers who have watched prices creep higher in recent weeks are starting to get antsy about when to pull the trigger on sales.
Yellow and green pea bids were averaging $5.70 per bushel last week, with some reports of $6 per bu. offers in Alberta. That has growers contemplating whether it’s time to sell the product in their bins or roll the dice and hold out for better returns.
“We’ve lost money for so long it would be kind of nice to hit something right for a change,” said a farmer from the Swift Current, Sask., area who requested anonymity.
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He recalled selling peas in 2002 for $7.20 per bu., one of the few times in his farming career that he managed to capture the market highs.
“I’m wondering if those prices could return?” said the grower.
A return to those peaks is highly unlikely, according to one special crops analyst.
Prices rose as high as $7.60 per bu. in the fall of 2002 but that was under an entirely different set of circumstances, said Brian Clancey, editor of Stat Publishing, a special crops newsletter.
Those handsome values were attained coming off a drought year where Canadian pea production fell to 1.37 million tonnes, one million tonnes below the average output over the past 10 years. By contrast, last year’s crop came in at 2.8 million tonnes.
“For markets to get up to that level (again) we’d have to be facing a significant supply problem,” said Clancey.
And that kind of run-up isn’t necessarily a good thing for the long-term health of the industry. Prices went so high in 2002 that it shut down demand. It killed feed pea exports to Europe and chased the Indians away from food peas.
“That’s why markets collapsed the remainder of the marketing year,” said Clancey.
It took a few years for the pea market to regain its footing after the customer backlash.
This year’s run-up in prices is largely demand driven. Between Aug. 1 and Dec. 31, 2006, India purchased 486,900 tonnes of peas, slightly ahead of the previous season’s frantic pace of 460,200 tonnes. India’s own production problems, coupled with severe drought in key supplier Australia have forced India to buy one of its food staples from Canada.
Clancey can easily see prices cresting $6 per bu. in the coming months because Indian demand remains strong. Values are already up 50 cents since the start of the year.
“I don’t think it’s done because we’re still selling peas at these levels. We’re not at prices that shut down demand yet.”
But he warned growers not to get too greedy, advising them to sell crop periodically rather than chasing after the elusive market high.
“You become so obsessed with selling at the high and you become so obsessed with your belief that markets haven’t peaked yet that you don’t recognize the worm has turned,” he said.
CGF Brokerage & Consulting said if drought-like conditions in India persist, new crop yellow pea pricing should “elevate rapidly” past the current $5 per bu. value.
In its weekly newsletter, the Saskatoon commodity brokerage firm advised growers with low or medium risk tolerance to lock in a small portion of expected production at today’s values, increasing sales as prices rise.
Those with high risk tolerance might want to hold onto their peas heading into what the company described as a bull market.
But CGF warned growers that, despite Agriculture Canada’s projection for a slightly smaller pea crop, there could be as much as a 100,000-acre increase in plantings if strong prices last into spring.
Clancey agreed pea acreage could easily rise, especially given soaring nitrogen fertilizer prices.
And he offered the additional caveat that India is a price-sensitive market where people either look for substitutes or go hungry when prices move beyond their means.
“You can’t impose a North American attitude towards food on people in India. It’s a dead different world,” he said.
That market reality will keep a cap on pea values, regardless of what the supply and demand charts say.
