Current Sales Position:
We are 90% sold on old crop 2017/18 yellow peas.
We are 80% sold on old crop 2017/18 green peas.
We are 20% sold for new crop 2018/19 yellow AND green peas.
This week, there were not a lot of developments on the Indian front. We do know that there are import restrictions in place that will expire on September 30th, 2018. With the tariffs in place, we’ve seen pea prices in India hit all time highs. It’s widely expected across the industry that the import restrictions could stay in place through the end of the 2018 calendar year, despite the fact the Indian government already achieving its objective to lift prices on the domestic market.
However, we know that India is sitting on about 3MMT of chickpea supplies, meaning their interest in importing yellow peas is likely pretty minimal.
Considering that the Indian government’s actions are tough to predict, it is hard to say though whether the import tax will be extended or not.
Next door in Pakistan, yellow peas are trading as high as $260 USD / MT (or $7.08 USD or $9.23 CAD per bushel).
Comparably, domestic prices in the Black Sea are also trading at similar levels, meaning that they’re too expensive to export and are getting pushed out of the market.
El Niño or No Niño?
There have been a few headlines about El Niño in the news lately and so we wanted to help clear the air about what this means for pulses crops.
El Niño is a weather pattern that happens when waters in the Pacific Ocean start to warm up.
For the likes of India, this means that if an El Niño pattern occurs, monsoon rains come in below-average. Obviously, this might affect Indian crop production potential. This year, should El Niño materialize this fall, it’ll likely have the most impact on the rabi (or winter) growing season in India which will just be starting to get planted at the same time.
But will it happen?
Earlier this August, the Indian Meteorological Department said El Niño will have no effect on this monsoon.
Conversely, Australia’s Bureau of Meteorology says that there is a 50% chance of El Niño forming in 2018.
One could argue that there has been some effect on Indian monsoon rains as current rainfall in the country is currently 9% behind the average. Should El Niño persist, there could be a bit of impact on India’s pulse kharif harvest, which is already smaller year-over-year thanks to the smaller acreage.
Thus, memories of small Indian pulse harvests from 2014 through 2016 come to mind when thinking of El Niño’s impact.
This in mind, India’s peas prices continue to hover near record highs. This is because the yellow peas supply is tight. This does not have to do with the occurrence of El Niño or even the below-average precipitation see so far this growing season.
AgCanada Gets Bullish on Peas
In their most recent report, Agriculture Canada lowered the 2017/18 Canadian peas carryout by 200,000 MT or 30% month-over-month to 500,000 MT. This was because they raised 2017/18 exports by 200,000 MT to 2.9 MMT, mainly because of the U.S. and China increasing their purchasing at a time when India is not interested. To keep things in perspective though, this is still 26% lower than 2016/17 Canadian pea exports.
For 2018/19, Canadian peas exports are forecasted by AgCanada at 2.8 MMT. We know today that China continues to be the main buyer, with Nepal and Spain also in the market.
This same 200,000 MT reduction in the 2017/18 balance sheet was passed through to 2018/19, meaning ending stocks this crop year have been lowered to 200,000 MT (from 400,000 MT forecasted by the AAFC in their July report).
Going south, earlier in June we reported that 2018/19 American planted peas area would fall by 22% year-over-year to 881,000 acres acres. This was largely due to an expected fall in area in North Dakota and Montana.
Assuming a return to normal yields and abandonment, Ag Canada is currently forecasting 2018/19 US pea production to rise to 700,000 MT. Further, the AAFC recognizes that the US has been successful in exporting small amounts of peas to common Canadian exports markets like China and Turkey.
Australian Drought Rages
Back in June, ABARES (the Aussie USDA) forecasted peas acres in the Land Down Undaa to decrease by nearly 17% year-over-year to a little more than 457,000 acres. Combined with average yields, they’re forecasting 2018/19 Aussie peas production to decline 26% year-over-year to a total of 213,000 MT.
The areas most affected include New South Wales, where 2018/19 pea acreage is expected to decline 40% to 76,600 acres. This would mean a production decline of 46% to just 28,000 MT.
In Victoria, peas acres are expected to decline 17% from the previous year to 123,552 acres, meaning the harvest is forecasted to drop 21% year-over-year to 55,000 MT.
In South Australia, peas production is expected to decline 17% to 104,000 metric tonnes.
Why are we giving you these June forecasts when it’s August?
Quite simply, dry conditions have hammered many parts of Australia, especially in the east. While New South Wales and Queensland are the states impacted the worst, this will still be the worst drought that many regions have experienced since 1960.
Thus, it’s widely expected that ABARE’s harvest projections will fall to something that could be easily categorized as the worst winter harvest recorded in a decade.
Peas Harvest Update
Last week, North Dakota’s peas harvest was pegged at 83% complete, up 24 points week-over-week. This is slightly ahead of last year’s pace of 79% harvested and way ahead of the 4-year average of 62%. With optimal harvest weather, it’s widely expected that the peas harvest could be finished in this coming week, which is well advanced of the 77% usually combined in North Dakota by the last Monday in August..
In comparison, Montana’s peas harvest was estimated at 77% complete, which is up 18 points week-over-week. This is still behind both last year’s progress of 89% and the 4-year average of 83% harvested
To the north, 55% of the Saskatchewan peas crop is in the bin, which is 25 points ahead of the 5-year average of 37%, and 1 point ahead of the harvest progress at this time last year. Heading into next week, the 5-year average for peas harvest progress in Saskatchewan is 60%. Yield reports are average-to-below average in the south, where most progress has been made. Those losses may be made up by good-looking fields in the northern half of the province though.
Unlike Saskatchewan, the percentage of the peas crop combined in Alberta is behind the norm. As of late last week, 38% of the Alberta peas crop had been harvested, which is 10 points behind the 46% combined at this time a year ago.
We also got an update on Alberta Ag’s yields estimate for peas, with the provincial government estimating numbers at 37.6 bushels per acre. This is slightly above an average yield of 37.3 bushels per acre that they were estimating at the beginning of August.
Keep in mind that this is also about 7% below the 4-year average of Alberta pea yields pegged by StatsCan at 40 bushels per acre.
Harvest Price Pressures Over?
Last week, we said that we saw harvest pressure on the peas complex but this week, it appears that prices have stabilized.
With the pace of the peas harvest accelerating, we’re seeing the usual harvest pressures at this time of year. However, this has been amplified by the currency situation in Turkey, as well as the fact this time a year ago, India wasn’t taxing pea imports.
As a reminder, from our 2018 Second Half outlook for peas, we said that seasonality is an important factor that comes into play around this time of year, with prices expected to rebound in November / December, once the harvesting season is complete.
More specifically, yellow peas had the best performance in July (likely due to production concerns) and December (when the harvest pressure is over). Conversely, green peas prices have performed well in August and July.
Our bias is that the outlook for peas remains bullish. The upside price potential is well supported by strong export prospects from China but the Indian peas import situation is a tough unknown to keep an eye on going forward.
On the major reports front, on Friday, August 31st, StatsCan will release their first 2018/19 production estimates, from which we’ll be doing our regular GrainCents in-depth analysis on. We’re also expecting an Indian production estimate out soon as well.
President | CEO
August 19– Peas Weekly GrainCents Digest
August 13– Peas Weekly GrainCents Digest
August 5– Peas Weekly GrainCents Digest
July 29– Peas Weekly GrainCents Digest