What is the outlook for red and green lentils in 2018/19? We know that the Indian import taxes aren’t helping anything, but what colour will pay best this year?
A couple weeks ago, we looked at the lentils acreage breakdown by colour in Saskatchewan going into the Plant 2018 campaign. The other significant factor is that the import taxes in India are mainly going to hurt red lentils prices, but not green lentils.
The import taxes in India are going to lead to an inevitable acreage drop in Canada. Currently, the estimate from the AAFC is for a 27% decline year-over-year to 1.2 million acres. Proving that is that lentils shipments are already down 450,000 tonnes from the previous year, through the first half of the marketing year.
However, most of this decline is attributed to red lentils, which depends more on India for export.
Green lentils have a market in Latin America, Europe, the Middle East, and North Africa. It has historically only found a market in India as a substitute for pigeon peas, and therefore, we tend to only see exports there when pigeon pea prices are high.
Last year’s drought in the U.S. also means that Canada has less competition from America in the green lentils market.
The drought was so intense last year, that even though American farmers planted 18% more acres, green lentils output in America was down 41%. This was mainly because average yields down by 50%.
The poor quality and yields in America mean that Canada has been able to edge out America from some of the green lentils markets. Since America and Canada are the top exporters, poor performance in America could give Canada an opening for significant export gains in 2018/19 of green lentils.
Further, last week’s USDA’s Prospective Plantings report showed us that American farmers will plant 791,000 acres of lentils in 2018, down 28% year-over-year.
Ultimately, with this acreage reduction and exports markets still relatively strong, green lentils are showing potential for positive returns in 2018.
The question that we’re asking is how many red lentils acreage will be abandoned for green lentils this planting year? Intuitively, we would argue that green lentils acreage should run nearly sideways.
Green lentil outlook bright, despite drop in prices for reds
India’s increased pulse duties have hit red lentils hard, but the greens avoid the resulting price plunge
There is no disputing that lentil acres are going to tumble in 2018 but not every type of lentil is headed for a decline, say analysts.
Agriculture Canada forecasts lentil plantings will fall by a whopping 1.2 million acres, a 27 percent drop.
Brian Clancey, analyst with Stat Publishing, believes all of the lentil decline will be reds with greens holding their own.
“Green lentils are outperforming reds by a long shot,” he said.
Large green lentils were selling for double the price of reds last week. They have largely been isolated from the market madness caused by India’s punitive import duties on peas, lentils and chickpeas.
“India is not an important destination for green lentils. If India is not there, green lentils don’t suffer,” said Clancey.
India can be in and out of the green lentil market depending on what is happening to pigeon pea prices in that country. Some Indian millers use green lentils as a substitute for pigeon peas.
But while red lentil exports are highly dependent on India, green lentils have alternative markets in Latin America, Europe, the Middle East and North Africa.
Marlene Boersch, managing partner with Mercantile Consulting Venture, is another analyst who believes green lentil acres will remain static.
Bulk lentil shipments are down 450,000 tonnes for the first half of 2017-18 compared to the same period a year ago but the decrease is made up entirely of reds.
Boersch said large green lentils are one of the few crops that can provide growers with positive net returns per acre in 2018, which will likely entice some Canadian red lentil growers to shift into greens.
“We also note that the lentil acreage in the United States is set to fall, likely significantly,” she said in a recent article she wrote for Saskatchewan Pulse Growers’ Pulse Market Report.
“This will reduce competition to Canadian green lentils.”
U.S. growers harvested 339,381 tonnes of green lentils last year, a 41 percent drop from the previous year despite planting 18 percent more acres of the crop. U.S. farmers mainly grow green lentils.
Drought devastated production in Montana and North Dakota. Average yields were half what they were the year before, which was an exceptional crop.
On top of production problems, U.S. exports have been poor as Canada has recaptured markets it lost to the U.S. in 2016-17 due to the poor quality of that year’s harvest.
“Their export demand has come off a fair amount. They’re just not having a good year,” said Clancey.
That is why he agrees with Boersch that acres will be down in the U.S. in 2018, but with average yields, they could easily produce a similar-sized crop.
Canada and the U.S. are the world’s top two exporters of green lentils.