Apr. 17 – Will Lentil or Pea Prices Pay Better in 2019?

Grain markets are in the green, alongside only green pea prices in the pulses category, as the complex gets a bit more bullish on some of the tough weather in the forecast.

“In order to deliver the emotional truth in the story, you have to include some of the literal truth.” – Theresa Breslin (Scottish author)

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Grain markets are in the green, alongside only green pea prices in the pulses category, as the complex gets a bit more bullish on some of the tough weather in the forecast.

The March NOPA soybean crush report came in just over 170 million bushels (or 4.627 MMT if converting bushels into metric tonnes) This was 2 million bushels above the pre-report estimates but still a little bit below the 171.86 million bushels processed in March 2018.

Will Lentil or Pea Prices Pay Better in 2019?

Despite a 33% import tax, India continues to be the largest customer of Canadian lentils, literally double what the next largest importer – the UAE – has bought. [1] There has been some speculation of that India could be buying more but they’re still trying to work through their own stocks which have been buffered by the two largest harvests ever in back-to-back years. This has helped firm up lentil prices elsewhere and has led some to believe that 2019 acres in Canada will increase, not pull back like many have been forecasting the past few months. [2]

In their April update, Agriculture Canada estimated 2019 lentil acres in the Great White North at 3.583 million, down about 5% (or 185,000 acres) from 2018, and 14% (or nearly 600,000 acres) below the five-year average. Assuming normal growing conditions and AAFC’s estimated average yields of just under 22 bushels per acre, this would produce a 2.1 MMT crop.

Right now, Indian farmers are harvesting their rabi crop, but growing conditions were dry this year in most growing regions for pulses. The Indian Ministry of Agriculture has been known to hold onto some whacky estimates and right now they’re forecasting 11.5 MMT of chickpeas coming off from this year’s rabi crop, but the market is thinking it’ll be a stretch to even see 9 MMT of chickpea production in India for this specific growing season.

Smaller production opens the door for potentially more yellow peas demand but the only thing standing in the way is the carryout from the past two years and India’s import quota of just 100,000 MT of all peas from all countries for the past year. It’s been rumoured, however, that some ports stopped enforcing the mandate, which is why an estimated 200,000 MT of yellow peas alone have been brought in since April 2018. At least 110,000 MT of those yellow peas is suggested to have come from Canadian origins.

While India’s general election will take place next month, I’ve said many times in the past year – including a FarmLead Breakfast Brief from a month ago – that I don’t expect the government to relax its import tariffs on all pulses until the monsoon rains are known. This means that those planting pulses this year don’t have any definitive trade policy to work with (other than the status quo) but we know that yellow and green pea prices are starting to diverge. For old crop specifically, we’ve seen cash green pea prices trade above $13 CAD/bushel on the FarmLead Marketplace in some regions while yellow pea prices have dropped to the low $6s in other areas. [3]

Can Pulses (or Anything Else) Pay?

Overall, with pulses, durum, and canola tied up in political controversy with India, Italy, and China respectively, this year’s search for profitability in Western Canada land has been more difficult than in the past few years. [4] To be fair, it’s not much different in the Midwest as the technicals suggests November soybean could drop down to $8 USD/bushel. Further, most analysts believe that the price of corn might receive some weather premium but the sheer amount of acres should put pressure on corn prices to the tune of something below $3.50 on the futures board in Chicago.

Jerry Gulke notes that right now, most farmers have an emotional reluctance to sell anything! [5] The fact there is still a lot of grain in the bin (slash, the world) and that some farmers are planting seems to be enough to keep the bears in charge of the direction of grain prices. But of course, more precipitation is expected in the Delta and most of the Midwest, while the Northern Plains will likely see some more snow. As such, the USDA’s crop progress report from Monday afternoon showed that U.S. corn planted is sitting at 3% complete, matching last year’s pace but behind the 5-year average of 6%. As I said in the FarmLead Breakfast Brief last Friday, the only thing that could potentially warm up grain prices – especially corn prices – is a weather market.

Also being questioned right now is if the land will be able to produce the same significant yields as it has in years past, given the trouble that Mother Nature gave farmers last fall during Harvest 18. [6] With the wet and sometimes snowy conditions (thinking of you Alberta), the ruts and damage that today’s big equipment did wasn’t able to get fixed in the fall and now could be tough to touch this spring. Ultimately, the hope for some brisk winds and low humidity is there but this spring’s wet forecast has been borderline offensive! Even in Northern Illinois, respected market analyst Dan Hueber notes the old-timer adage that if it rains on Easter Sunday, then you should expect rain on the next seven Sundays! [7]

This is where the old saying, “if it were easy, everyone would do it” comes to mind.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

Due to travel, futures grain prices aren’t into today’s FarmLead Breakfast Brief but you can find them here

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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