Another Saskatchewan pulse processing plant is in trouble.
After only a few years in the business, Mainline Pulse Inc. of Chaplin, Sask., has closed its doors, at least on a temporary basis. The company joins a long list of failed and faltering special crops businesses.
“There are others that appear to be in trouble,” said industry analyst Brian Clancey.
That’s because the pulse industry is overbuilt. He estimates an additional 250,000 tonnes of processing capacity came on line this spring, which hasn’t helped.
According to Clancey there is 28 percent too much pulse processing capacity in Saskatchewan, which is where the majority of Canada’s special crops are grown. That means one out of every four plants shouldn’t be there.
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“I think plants are going to shut down. It’s just as simple as that.”
Others agree there is excess capacity in the industry but say that is a temporary imbalance.
Back-to-back droughts followed by a year of below-average production in 2003 have created a situation where it’s difficult for every plant to get the product it needs, said Shawn Buhr, chair of Saskatchewan Pulse Growers.
Pulse production on his farm near Lucky Lake, Sask., was 70 percent below normal, which is causing hardships for local processors.
“A lot of my neighbours are in the same boat, we just don’t have anything to deliver. It had nothing to do with the fact we changed our seeding intentions. It’s strictly a production problem.”
He thinks continued expansion of the pulse sector will eventually fill up the excess capacity, but there may be some short-term casualties on the processing side of the business, especially south of Highway 1.
“There certainly were a lot (of facilities) built on the expectation of handling chickpeas,” said Buhr.
Saskatchewan’s seeded acreage of that crop has fallen from a high of 1.2 million acres in 2001 to 130,000 acres in 2003, due in a large part to the prevalence of ascochyta blight.
Crop Development Centre breeder Bert Vandenberg shares Buhr’s view that the situation isn’t as dire as Clancey portrays it. He said Saskatchewan has underproduced more than it has overbuilt.
“Would it be a problem if we had more rain?” he postulated.
Like many businesses, the pulse industry is going through a cyclical valley, said Vandenberg.
“It has happened in Australia too. There are companies that are having trouble for the same reasons – there was no crop.”
But Clancey said the industry didn’t respond from two years of drought the way many thought it would. And while there will likely be continued growth in the seeded acreage of peas, lentils and beans, it won’t be anything like the industry experienced around the turn of the century.
He also pointed out that not all of the problems in the pulse industry are due to production. Many people who got into the special crops field knew nothing about trading but found themselves speculating like mad and lost their shirts as a result.
“As soon as you think you’re really smart, I tell you the market is going to kick you in the side of the head, and that’s one of my kinder descriptions of what the market will do to you.”
