Excess rain has decimated about one-quarter of this year’s lentil crop, but the jury is still out on how much quality damage there is on what remains, say industry officials.
Greg Simpson, president of Simpson Seeds, one of Saskatchewan’s largest lentil processors, said yields are highly variable.
He was combining a field of Eston-type lentils on his farm near Moose Jaw last week that averaged 35 bushels per acre. His cousin, who farms 20 kilometres west of him, was hailed out.
“His (yield) monitor on his machine was zero,” said Simpson.
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An area between Moose Jaw and Buffalo Pound is also a write-off due to hail.
“Inside that area the lentil crops are history. They’re going to be zero to five (bushels per acre),” he said. “Basically it’s a clean-up operation.”
Simpson has a niece who farms near Kyle, Sask., an area that has received more than 500 millimetres of rain.
“I’m really concerned for the guys at Kyle, Kindersley and that whole area that has been hit heavily,” he said.
Simpson was originally forecasting 3.82 million tonnes of Canadian lentil production, but his new estimate is for 2.87 million tonnes, a 25 percent reduction.
That is in line with what industry analysts are forecasting. Larry Weber, an analyst with Weber Commodities, came up with an estimate of 2.95 million tonnes in the August issue of Saskatchewan Pulse Growers’ Pulse Market Report.
Chuck Penner, an analyst with LeftField Commodity Research, had a best case scenario of 3.8 million tonnes and a worst case scenario of 2.6 million tonnes in the same publication.
Saskatchewan Agriculture is forecasting an average lentil yield of 1,300 pounds per acre, which is 11 percent below the five-year average. That would produce a 3.44 million tonne crop, assuming there were no lost acres.
Statistics Canada was scheduled to release its latest production estimates Aug. 23, which is after The Western Producer’s publication deadline.
Simpson is estimating 2.1 million tonnes of red lentil production, which would be more than adequate to meet the expected demand.
“We’re not short,” he said.
Indian demand for both red and green lentils is expected to tail off in 2016-17 because of vastly improved monsoon rains and more pulse acres.
Where there might be some tightness is with large green lentils. Simpson believes about 500,000 tonnes of that crop will be harvested.
“We’re going to need them all,” he said.
There is debate about how much quality damage was inflicted by persistent summer rains.
John Duvenaud, publisher of Wild Oats Grain Market Advisory, expects most of the crop to grade Extra 3, and there will also be a lot of No. 3. The standard export contract is for No. 2 quality lentils.
“I don’t think there’s enough No. 2 lentils going to be combined in Western Canada to satisfy all the contracts that have been written,” he said.
As well, a lot of contracts were signed last winter because of high prices and rapidly dwindling global supplies of the commodity.
Many in the trade believe 40 percent of the anticipated 2016 crop was forward sold, which is much higher than normal.
Duvenaud’s advice to growers who harvest a No. 2 or better lentil is to shop it around because there should be plenty of demand.
“You’ve got a valuable commodity if you’ve got a No. 2 and can deliver it,” he said.
He doesn’t believe growers will have much problem marketing their extra 3 quality lentils, but selling No. 3 lentils may require plenty of work and patience.
Simpson’s gut feel is that there will be a higher percentage of No. 3 and Extra 3 lentils than No. 2 or better.
If it is heavily skewed toward the No. 3s and Extra 3s, exporters would have to ask overseas buyers to renegotiate contracts or face paying penalties.
The good news for processors is that the contracts were negotiated at high prices, and prices have fallen since then. The opposite scenario would have been a “blood bath,” he said.
Many grower contracts contain Act of God clauses that protect them against things like hail damage, but there are still lots of deferred delivery contracts where they may have to make up the difference between the quality they deliver and what they committed to deliver.
