The rain in Spain hasn’t fallen anywhere this year, not even on the plain, a situation that should generate much-needed demand for Canadian peas.
According to the country’s national meteorological institute, Spain has experienced the driest winter in the 57 years that records have been kept, leading local crop traders to forecast a total grain harvest of 17 million tonnes, down 28 percent from last year’s 23.7 million tonne crop.
“Opportunities should be good this coming year because of the dryness in Spain,” said Shaun Wildman, senior pea merchandiser with Saskatchewan Wheat Pool.
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The country is by far the leading importer of Canadian feed peas and often vies with India as the top overall buyer of Canada’s pulse crops.
So a production deficit of that magnitude could lead to demand that would eat up some of Canada’s considerable pea surplus.
Statistics Canada reports that as of March 31, farmers and grain handlers were holding 1.79 million tonnes of peas, a 90 percent increase over the same time last year.
“It is huge. You cannot help but be overwhelmed by the stocks,” said Wildman.
He is forecasting ending stocks of 619,000 tonnes, which is at the low end of industry estimates ranging as high as Stat Publishing’s 895,000 tonne number.
Even using Wildman’s aggressive projection, the stocks-to-use ratio would be at a record 21 percent. It hasn’t been that high since 1988-89.
“It’s massive. So we need this business. We need Spain to be in the market,” said Wildman.
Canada shipped $83 million worth of peas to Spain in 2004. The sales pace has been slower for the first seven months of the 2004-05 marketing year. Exporters moved 227,000 tonnes of peas to Spain during that period, down from 352,000 tonnes a year earlier.
Sales are expected to pick up in coming months but Canada won’t have unimpeded access to the Spanish feed market. Exporters will face stiff competition from South American soy meal, Black Sea feed wheat and French peas.
“All of those things are going to combine to limit the ability of (Spain) to firm up the market too much,” said Wildman.
While strong crop prospects in northern and eastern Europe may keep a lid on any potential feed pea price rally, there are scenarios where edible peas could get a boost by the Spanish grain deficit.
If France is busy supplying feed peas to that destination, it won’t be as active in India, Bangladesh and Pakistan, which could improve prices in those all-important human consumption markets, said Wildman.
So after what can best be described as a dismal year for Canadian pea markets, farmers are starting to see rays of light.
The Spanish harvest will start in the south in about two weeks and wrap up in the north around the end of July. Spanish buyers have told Wildman their crop is beyond repair. Three-quarters of it will suffer drought damage regardless of what happens from now on.
Canadian pea producers are well positioned to take advantage of the Spanish shortfall. Pea prices are as low as they have been in 10 years, ocean freight rates have dropped a bit and Spanish livestock operators are familiar with the feed ingredient.
“It is not a country like Korea where you’ve got to discount (peas) heavily to get them to incorporate it (into rations),” said Wildman.
There is also price-supporting news on another front. One of Canada’s main pea competitors is dealing with poor growing conditions.
Coming off a summer season drought, Australian producers are heading into their winter crop with poor soil moisture levels. Canadian producers, on the other hand, are optimistic about production prospects.
