Sales of the biggest pea crop in Canadian history have ground to a halt.
“In terms of new business done in the last month, it has been terrible, absolutely terrible,” said Shaun Wildman, senior pea merchandiser with Saskatchewan Wheat Pool.
Crop traders can’t convince growers to part with their peas at current prices and nobody expects the stalemate to resolve itself until the new year.
Wildman estimates less than one-third of the 3.3 million tonnes of new crop has been handled, well below the normal marketing pace.
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The industry faces the irony this year that although grower prices have fallen, overseas buyers still find the product expensive.
Grower bids for yellow peas are in the $3.50-$3.75 per bushel range for No. 2 or better product delivered to plant.
But with ocean freight costs still near record highs and the loonie near 85 cents US, the landed price in India, the biggest export market for Canadian peas, is close to $8 Cdn per bu.
That’s as high as 2002, but back then farmers received $6 per bu. for yellow peas, said Wildman.
“The Indian buyer is looking at the landed price and saying, ‘this is out of our league.’ “
Feed markets are equally stagnant. Half of the 2004 pea crop is feed quality but traders are finding it impossible to compete with feed wheat that is selling for less than $2 per bu., not to mention cheap U.S. corn and soymeal, said Wildman.
Lower pea prices haven’t attracted much attention from domestic mills either.
“In fact, if anything we’ve probably backed off a little,” said Paul Cassidy, purchasing manager with Master Feeds.
Hog rations have been reformulated to use higher volumes of cheap soybean meal. The volume of peas being used is pretty much “maxed out,” said Cassidy.
With all those factors conspiring against them, pea farmers better get used to the idea of low prices, said Wildman.
“We need a problem somewhere in the world or we need a significant reversal in the currency trends or the freight trends. Something has really got to change because right now things aren’t looking too positive.”
Saskatchewan Pulse Growers chair Shawn Buhr said the only way the stalemate will be broken is if prices rise.
“We typically will not sell peas below $4 and historically it has worked out that seems to be the strike price for a lot of people.”
Even if he has to wait a year to get an extra 50 cents per bu. on yellow peas now fetching $3.50 per bu., that will be a 14 percent increase, which more than covers what he would forego in interest income.
Buhr concedes that pea markets are grim, but he believes farmers have the upper hand when it comes to this particular marketing impasse.
His 2004 yellow pea crop performed “head and shoulders” above the other crops grown on his farm near Lucky Lake, Sask. Some of it was pre-sold at a good price and he moved quite a few peas at $4 per bu. right off the combine.
He thinks a lot of farmers are like him and have already covered their operating costs of growing peas. They can afford to play the waiting game.
“We have the ability through the cash advance program to have a little bit more staying power.”
With a large crop and significant marketing challenges confronting the industry, Statistics Canada is forecasting 600,000 tonnes of ending stocks for the 2004-05 crop year.
That would be the largest pea carryover in history, twice as big as any ending stocks in the past five years. Wildman said that implies farmers are not going to see the market rally they are waiting for. He thinks it’s just a matter of time before some peas start to make their way through the system.
“I think a lot of people in the grain industry are wondering when it’s going to happen because ultimately we’re not going to sit on this whole crop. It’s going to move.”
