Aug 5 – Lentil Prices, Trade, & Weather to Start August

Today we’re looking at pulses and lentil prices mostly, but futures grain markets are still in the red, following last week’s trade, rain, trade war issues.

“Do not wait; the time will never be ‘just right.’ Start where you stand, and work with whatever tools you may have at your command, and better tools will be found as you go along.” – George Hebert (Welsh poet)

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Aug 5 – Lentil Prices, Trade, & Weather to Start August

Today we’re looking at pulses and lentil prices mostly, but futures grain markets are still in the red, following last week’s trade, rain, trade war issues. Market participants are focusing on said weather but also positioning themselves ahead of next Monday’s August WASDE report. Today, expectations are that we could see a big reduction in planted acres for both U.S. corn and soybeans. [1] As today is the long weekend Monday in Canada, canola futures markets are not trading.

Speculators reduced their net-long position in corn futures last week to their lowest level since the start of June, suggesting that bullish sentiment is weakening. Conversely, soybean’s net-short position held by fund managers grew to their largest level since June 11th as investors continue to cool on weather and the trade war developments. For the latter, China says that U.S. President Trump’s accusations that they haven’t been buying enough ag products are “groundless”. [2]

On the crop development front, August weather will be critical for both U.S. and Canadian crops. Healthy rains are expected to fall this week in the Western Corn Belt and Northern Plains, but the rest of the Midwest is expected to trend a bit drier. [3] As a reminder, Illinois and Iowa saw one of their driest Julys ever, with just 5% of normal precipitation falling in a few areas. From a crop progress standpoint, the market is looking to see corn good-to-excellent (G/E) ratings of 57% (58% last week, 71% a year ago, and 70% five-year average). For soybeans, expectations are to see no changes this week with the G/E rating staying at 54% (63% five-year average).

U.S. seven-day rain forecast as of August 5, 2019

Will India Push up Peas, Lentil Prices?

The kharif summer growing season in India is underway but the monsoon rains that growers hope for haven’t been as plentiful as years past. Up until two weeks ago, average rainfall down in the major pulses-producing states by an average of about 40%, creating a bit of concern over the production potential of pulses. [4] However, the past two weeks, except for the southern peninsula, we’ve seen significant rains across India to get cumulative moisture volumes back to near-normal.

Despite the healthy rain, the planting of pulses through Friday, August 2nd, 2019 is tracking about 8% behind last year’s pace. Pulses prices in India have accounted for a little bit of these production concerns with spot yellow pea prices up nearly 11% year-over-year and small red lentil prices up more than 6% year-over-year.

Before getting all excited about lentil prices doubling to 2016 levels, there’s still 2 months of the monsoon season left to go in India and so the crop is far from finished. [5] More concretely, production practices in India have changed considerably and the impact of less moisture isn’t as drastic as it’s been in years past. Still, the rain is important as two-thirds of India’s population depends on farm income and, similarly, nearly two-thirds of India’s crops are not irrigated. [6]

Moreover, India is concerned about cheaper imports as part of an Asia-Pacific trade pact that they’re negotiating right now and would negatively impact their farmers. [7]  While seeding and crop progress is a bit behind for the summer kharif season, I mentioned a few weeks ago that India is still expected to produce about 23 MMT off pulses this year. As a sidenote, the kharif seasons tends to be a major producer of pigeon peas, of which green lentils are common substitute for.

Western Canada Pea, Lentil Prices

On that note, Laird large green lentil prices in Western Canada continue to hover around that 23 cents per pound level (or $375 USD or $508 CAD/MT if converting pounds to metric tonnes). [8] Comparably, small red lentil prices are sitting near that 17¢/lbs level. Unless we see an early frost of some sort, or a significant reduction in monsoon rains in India, then lentil prices might be staying here until we get into the 2020 calendar year.

Saskatchewan average small red lentil prices through July 31, 2019

As for pea prices, markets are firming up a bit according to StatPub as ending stocks are getting a little tighter than initially thought. [9] Agriculture Canada’s estimate this month of 2018/19 Canadian peas carryout was lowered by 100,000 MT to 200,00) MT, thanks to peas exports being increased by an equivalent 100,000 MT to 3.2 MMT. With domestic consumption above 900,000 MT (and expected to climb as new pea processors in Western Canada come online), the demand function for peas is looking solid.

AAFC's July 2019 estimate of Canadian pea prices and ending stocks

If India were to come back to the market at all, this would be very bullish but as I’ve mentioned many times in the past, this will be a function of whether or not the monsoon rains materialize and India has a good pulses crop. Coming back to the present, old crop pea prices have fallen significantly on the recent rains that Western Canada has been getting. When looking at the green pea prices chart below, it might remind you of the feed barley prices chart shared in Friday’s FarmLead Breakfast Brief, which have also seen a bearish push on the recent rains.

Saskatchewan average green pea prices through July 31, 2019

To growth,

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

At 7:55 AM CST in the North American futures markets (*not cash prices*):
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.3237 
CAD, $1 CAD = $0.7555 USD)

Sept Corn: -7.3¢ (-1.8%) to $3.923 USD or $5.192 CAD
Sept Soybeans: -10¢ (-1.15%) to $8.458 USD or $11.195 CAD
Sept Soybean Meal (per short ton): -$2.10 (-0.7%) to $292.40 USD or $387.05 CAD
Sept Soybean Oil (cents per lbs): -0.33¢ (-1.15%) to 27.99¢ USD or 37.05¢ CAD  
Sept Oats: -2.5¢ (-0.95%) to $2.63 USD or $3.481 CAD
Sept Wheat (Chicago): -8.8¢ (-1.8%) to $4.82 USD or $6.38 CAD
Sept Wheat (Kansas City): -5.8¢ (-1.35%) to $4.16 USD or $5.507 CAD 

Sept Wheat (Minneapolis): -1.8¢ (-0.35%) to $5.205 USD or $6.89 CAD
Nov Canola: closed for August long weekend Monday but ended last Friday at to $10.088/bu / $444.80/MT CAD or $7.621/bu / $336.02/MT USD

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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