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.
Despite short term price pressure on the yellow side on the market that we spotted this week, the outlook for peas remains relatively bullish.
Average yellow peas prices delivered to Saskatchewan elevator are sitting around $6.38 CAD / $4.90 USD per bushel (down 12 cents CAD on the week). Comparably, green pea prices in Saskatchewan are pegged at $8.20 CAD or $6.70 USD per bushel (steady on the week).
Two weeks ago, we said that seasonal price movements are an important factor that comes into play around this time of year. For a number of crops, including peas, late August to October is when a low typically occurs, as harvest pressure kicks in. And we saw lots of that coming into play this week.
Like most other crops, a major factor we’re becoming more cognizant of for pea prices is the strengthening Canadian Dollar. The Loonie has been buoyed by slightly stronger oil prices (fuelled by geopolitical risk) and the Bank of Canada (BoC) raising interest rates yet again this week (they now sit at 1.5%). It’s widely expected that the BoC will hike Canadian interest rates again before the end of 2018, suggesting some additional strength in the Loonie.
Ultimately though, we reiterate our call from that the Loonie will likely trade between 75 and 80 cents through the end of the year.
As the Canadian Dollar strengthens, it can weaken the competitiveness of exported Canadian crops, as it decreases the purchasing power of international buyers.
What’s the Indian Pea Crop Looking Like?
Among the developments we can point out on the global conditions front this week, perhaps the pulse situation in India is the most important.
The planting of kharif acres in India is in full swing. According to the Indian Ministry of Agriculture (IMD), Indian farmers seeded about 22.54 million acres of pulses in the Kharif crop, down almost 9% or nearly 2.44 million acres from the nearly 28 million acres seeded at this time last year. This is also 13% or 3.93 million acres down from the 5-year average of 29.47 million acres.
However, the seeding of the Kharif planting season in India has relevance for the pea crop because of its local variety, Tur. Specific to this crop, the IMD said that Indian farmers seeded about 8.66 million acres of the tur crop, down almost 4% or nearly 400,000 acres from the 9.06 million acres seeded at this time last year. This is also 16% or 1.69 million acres down from the 5-year average of 10.35 million acres.
We think this is another reason behind this week’s rally of peas prices in India, in addition to their government intervention, as shown on the chart.
Here are more data points on the progress of Tur crop planting progress in the Kharif season in major Indian producer states:
– Maharastra: 2.6 million acres, down 8% year-over-year and 15% behind the 5-year average of 3.07 million acres
– Karnataka: 1.99 million acres, up 10% year-over-year and 1% behind the 5-year average of 2.02 million acres
– Madhya Pradesh: 1.38 million acres, down 1.75% year-over-year and unchanged from the 5-year average
– Gujarat: 500,000 acres, down 18% from both 2017/18 and the 5-year average of 610,000 acres
– Utar Pradesh: 500,000 acres, down 14% year-over-year and 32% behind the 5-year average of 740,000 acres
As we said, the pulse production in India almost wholly depends on rainfall. Through last week (On July 25), cumulative monsoon rains were pegged at an average of 384.7 mm (15.4 inches) for the whole country. That is 3% behind the average, and thus, is a bit bullish for peas prices.
Looking regionally, the major agricultural region of northwest India received 93% of rains. The east and northeast are in shortest supply, with total rains being 31% below average. Conversely, the South Peninsula and Central India are witnessing a moisture surplus 9% to 16% above the normal for this period.
According to IMD, rainfall activity is likely to be normal to above normal across the whole country in the next two weeks. At a more regional level, isolated extremely heavy rainfall is also likely to occur over West Uttar Pradesh & northwest Madhya Pradesh in the next week.
We need to point out that Uttar Pradesh and Madhya Pradesh are among the top 5 peas producer states. Also, we need to point out that Maharastra, that is by far India’s largest peas producer state is at a rainfall surplus. This might explain the delay in the tur planting progress during this Kharif season there. In comparison, Karnataka is getting normal rainfall.
On the pricing front, we find that Indian yellow prices have now rallied to levels not seen in the past five years. The Indian government should be proud of themselves as it appears that they’ve attained their objective to lift pea prices on the domestic market.
So, will the import tax on peas be removed? Well, we stated last week that we expect a return of stronger international peas demand by India, although it will be delayed in 2018/19.
Canadian Peas Balance Sheet Updates
Last week, we also reported that China will once again be a big buyer of Canadian peas in 2018/19 but the buying activity will not kick in right away.
According to the Canadian Grain Commission (CGC) monthly data, Canada exported 110,400 MT of peas in June. This is three times less than the 373,000 MT exported the month before. We need to point out that once again, China was the top buyer, taking 104,600 MT of Canadian peas.
That being said, in their most recent report, Agriculture Canada kept 2017/18 Canadian peas carryout at 700,000 tonnes.
For the 2018/19 crop year, AgCanada trimmed ending stocks by 190,000 MT (or 32%) to 410,000 MT. This translated to the 2018/19 stocks-to-use ratio going from 15% in June to 10% in July.
Part of the reason for the bullish stocks-to-use ratio is that new crop peas production was lowered by 240,000 MT to (or 6%) month-over-month to 3.61 MMT! This is mainly attributed to lower seeded acres. You’ll recall that StatsCan said Canadian farmers planted 3.6 million acres of peas, down 7% or 265,500 acres less than what they predicted in April.
Finally, we need to point out that AAFC did not modify their 2018/19 peas price range of $220 to $250 CAD per MT (or $4.55 to $5.20 USD cents per pound or $6.00 to $6.80 CAD per bushel).
Good-Looking North American Peas Crop
According to the latest Saskatchewan Agriculture crop report, many pulse fields in drier areas are rapidly drying out and producers have begun desiccation in some areas. Considering the amount of moisture some areas had this year, the peas crop is looking better than expected.
Specific to peas, 70% of the province’s crop is rated good-to-excellent (G/E), a 3 point drop from 2 weeks ago but almost identical to the 5-year average of 71% rated G/E.
Next door in Alberta, the peas crop rated G/E is sitting at 67%, down 7 points from one week ago but 2 points above the 5-year average of 69%.
To the south, 81% of North Dakota’s peas crop is rated G/E, unchanged week-over-week. That’s ahead of both the seasonal average of 63% and last year’s G/E rating of 14%.
Next door, 68% of Montana’s peas crop is rated G/E, down 9 points from the 79% reported last week. This rating is way ahead of the 6% reported at the same time last year though and 46 points ahead of the 4-year average of 54%.
Going into tomorrow’s USDA Crop Progress report, the four-year average for peas crop quality in North Dakota and Montana rated G/E is usually 63% and 47%, respectively.
To sum up, the peas market continues to face good prospects despite this week’s price pressure. Again though, this is in line with the seasonal pattern at this time of the year, as harvest is around the corner.
Looking forward, we think that the peas market has more upside potential due to lower new crop supplies, ongoing demand coming from China, and a likely return in demand from India, albeit delayed to later in the 2018/19 crop year.
Have a great week!
– Brennan, Garrett, and Adrian
July 22– Peas Weekly GrainCents Digest
July 15 – Peas Weekly GrainCents Digest
July 8 – Pea Prices Outlook for the Second Half of 2018
July 1 – Peas Weekly GrainCents Digest
June 29 – US Peas Acres Down 22%, Stocks Up 1% YoY
June 29 – StatsCan Reports 3.6 Million Acres of Peas in 2018/19
June 24 – Peas Weekly GrainCents Digest