U.S. jumps into pea market

Chuck Penner, analyst with LeftField Commodity Research, is forecasting the U.S. will need to import 450,000 tonnes of peas, up from about 100,000 tonnes last year. The vast majority of that will come from Canada. | Robin Booker photo

The United States is going to displace China in the driver's seat of the pea market in 2021-22, says an analyst.

Pea production in the U.S. is estimated at 500,000 tonnes or about half of a normal crop.

Meanwhile, domestic consumption is estimated to remain at 850,000 tonnes, while more will be needed to fulfill at least some of the country's export obligations.

"That shortfall in the U.S. is probably going to be the key market driver," Chuck Penner, analyst with LeftField Commodity Research, told delegates attending the 2021 Pulse and Special Crops Convention.

He is forecasting the U.S. will need to import 450,000 tonnes of the crop, up from about 100,000 tonnes last year. The vast majority of that will come from Canada.

Normally that wouldn't be a problem but Canada is also harvesting a short crop. Statistics Canada is forecasting 2.63 million tonnes, which would be two million tonnes below last year.

Penner thinks it will be closer to 2.5 million tonnes due to abandoned acres.

Jeff Vipond, general manager of pulses and seed with Scoular Canada, believes those two estimates are optimistic.

He noted that Saskatchewan Agriculture's average yield forecast is 21 bushels per acre, well below Statistics Canada's 25 bu. number.

Vipond also believes the U.S. will import in excess of 500,000 tonnes of peas based on what is already on the books, so the Canadian crop will be smaller and the demand will be larger than Penner is forecasting.

Penner estimates 2.25 million tonnes of Canadian peas will be exported in 2021-22, a drop of 1.25 million tonnes from last year.

Other exporters like Russia have more peas to ship than they did last year but it won't make up for the shortfalls in Canada and the U.S.

Something is going to have to give. He believes Canada will be shipping far less to markets like China and Bangladesh.

Demand from China was already starting to falter prior to the news of the short crop in North America. Peas were being priced out of feed rations.

Penner is forecasting a 1.4 million tonne export program to China, down from slightly more than 2.5 million tonnes last year, a year where China took 72 percent of Canada's exports.

Kevin Price, senior export trader with Parrish & Heimbecker, said that sounds about right. China has already contracted about 600,000 tonnes, which will be enough to last through the end of December.

He believes China will be back in the market in the first and second quarters of 2022 for another 700,000 tonnes of Canadian peas for the fractionation sector as well as for birdfeed and food use.

"We think the feed guys will tap out by then," said Price.

Penner said average yellow pea bids are $15 per bu. with individual bids as high as $17.

Those are record high prices but farmers holding out for even better values.

Vipond said 2020-21 was a good year for growers and they are in the financial position to wait out the market.

He believes if the average price increased to $17 some growers would still hold out for $18 or $19.

Green pea prices are at $16, which is below the record level of nearly $18 set in 2012 but they are heading in that direction.

Bids in the U.S. are higher for both crops and that is pulling Canadian prices along for the ride.

The big wildcard in the pea market is whether India will reduce its import quotas and duties on peas.

Penner thinks that is a possibility but by the time that happens Canada could be sold out.

The United States will be the driver of the pea market this year because production is way down in that country and domestic consumption is robust, says Chuck Penner, analyst with LeftField Commodity Research. He was speaking at the 2021 Pulse and Special Crops Convention. | Source: LeftField Commodity Research

Rav Kapoor, chief executive officer of ETG Commodities, said India's monsoon rains have been 27 percent below average but meteorologists expect a revival in September.

If they are wrong and the rains turn out to be poor in September as well, it will affect the planting of the winter, or rabi, crop of pulses and they will need to import desi chickpeas and yellow peas.

He thinks that could drive pea prices to as high as US$700 per tonne, or more than $100 per tonne higher than today's levels.

Kapoor said the world is going to be short of pulses and will need two consecutive years of bumper crops to fill the void.

Kapoor's bullish comments raised the eyebrows of Quinton Stewart, senior pulses trader with Viterra, who joked that it might be a good time to buy farmland in Canada.

Penner estimated Canada's ending stocks of peas will be around 125,000 tonnes, down from 575,000 tonnes last year.

Contact sean.pratt@producer.com

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