When we started 2017, lentil prices were still doing pretty good, but there were some bearish challenges from healthy 2016 monsoon rains in India.
The great kharif/summer crop was setting up things for a record Rabi/winter pulse crop scenario.
As such, going into 2017, small red lentil prices for new crop, 2017/18 was sitting around 27 to 30 cents CAD/pound. This was well down from the sales some farmers made successfully on the FarmLead Marketplace in the 40s and 50s cents per pound range in 2016.
Even 2016/17 old crop sales in early 2017 were being made in and around 35 cents CAD per pound, so why contract new crop acres for anything less than that, right?!
For large green lentil prices, things were even better as we saw values above 60 and 70 cents CAD/pound trade on the FarmLead Marketplace. However, new crop large green lentil prices were not trading above 50 cents CAD/pound.
Thus, there was skepticism held by many a farmer that they should be contracting a lot of new crop lentils, considering where they were making sales on old crop.
There was still some optimism for better lentil prices going into the 2017/18, growing season, albeit not as much as 2016/17.
Thus, I had correctly forecasted at the beginning of 2017 that lentils acreage in North America likely wouldn’t drop too significantly.
We also successfully recommended at that time to be up to 40% forwarded contracted on your lentil acres before any planters rolled.
I guess you could argue that this number turned out to be low but 40% is the maximum we could get an Act of God clause on (put another way, we were managing production vs. sales risk).
Lower 2017/18 Lentils Acres, Production
With this in mind, 2017/18 Canadian lentils acres dropped about 25% from its record from the 2016/17. This meant that a little more than 4.4 million Canadian acres got planted in 2017/18, compared to 5.86 million the spring before.
At 4.4 million though, that’s still 21% more than the five-year average (which does include 2016/17’s record area).
Statistics Canada says that lentils output in the Great White North would be 21% lower compared to the previous year at 2.56 million tonnes. Average 2017/18 Canadian lentils yields of 21.4 bushels per acre were 3% better than the year prior though (although wet weather negatively impacted last year’s Canadian lentils yields).
As we mentioned in a pulse outlook at the end of October 2017, about 2/3s of production – or about 1.7 million tonnes – was attributed to small red lentils. That’s technically a 700,000-tonne reduction year-over-year.
It’s not the same for the Canadian green lentils harvest though as just over 800,000 tonnes were combined, or nearly 6% higher compared to 2016/17’s crop.
In the US, more green lentils are planted (and thus harvested) than there are red lentils. Despite acreage expanding significantly, green lentils production dropped about 4% to a little more than 550,000 tonnes.
Despite the lower production, we continued to see stronger prospects in India for the second straight year.
Overall, through the fall of 2017, pulse prices continued to trend lower globally. Production was still relatively strong out of North America, Black Sea output was impressive, and again, the Indian outlook was promising.
We successfully made the right call to sell lentils in mid-August as harvest was hitting full-stride.
We made another right call in mid-September to sell lentils again as it was clear how the market was interpreting another above-average lentils crop in North America.
Most recently, we made the call to sell more lentils in late October, cognizant of some scary trade rumors that were flying around.
The one bullish production lentils factor was in the southern hemisphere. Drier conditions in Australia has felled production in the Land Down Undaa by half. Granted, last year was a bumper/record crop for most cereals, pulses, and oilseeds in Australia, 2017/18 production is still below their five-year averages.
No headline in the lentils market though compared to the ones the Indian government generated.
India’s Government Policies Bomb Pulse Markets
At the end of September, India’s fumigation exemption for Canadian pulses getting exported there was not renewed. It was suggested that this could add $15 CAD/metric tonne to the cost of trade and effectively push Canadian pulses out of the market (at least for most crops).
The same exemption lost by Canada is expected to expire for US and French exporters on December 31st.
Fast forward about 6 weeks into early November and the India government decided to implement a 50% import tax on yellow peas.
Then, about 5 weeks later in mid-December, the Indian government announced a 30% import tax on lentils.
Why? The Indian government is trying to support the increase of production of pulses domestically, instead of having to rely on imports.
As we’ve mentioned the effect of India’s peas import tax on Canadian peas exports, the lentils tax hurts quite similarly. In 2016/17, India imported 541,000 tonnes of lentils from Canada. Or 63% of all Canadian lentils exports.
Put another way, 90% of India’s lentils imported in 2016/17 came from Canada.
The tax might be working though, as Indian farmers are expected to plant 4.35 million acres of lentils in their Rabi crop!
And the numbers don’t lie. As of data available before Christmas, Canadian lentils exports were sitting at a little less than 114,000 tonnes.
By Christmas 2016, 510,000 tonnes of Canadian lentils had been shipped out. Simply put, Canadian lentils exports are tracking nearly 80% below last year’s pace!
One thing to note, and as was outlined in a recent GrainCents post, small red lentil prices are bouncing back a bit as we turn the calendar over in 2018.
2018 Lentil Prices, Market Expectations
Next week, we’ll be releasing our 2018 lentils forecast to subscribers of GrainCents.
Our price outlooks, trends, and forward-looking, actionable insight will allow you to start penciling in gains and prepare yourself for selling opportunities where others are not looking.
This 2018 lentils forecast alone is worth more than the $350 USD annual subscription to GrainCents.
This is the best way to accelerate your grain marketing plan in the New Year.
In GrainCents right now, there are 5 different factors that we have identified as either bullish, bearish, or just noise for lentil prices. We also identify in GrainCents what percentage you should be sold on your 2017/18 old crop lentils, as well as where your sales should be on your 2018/19 lentils crop.
In addition to daily insight on prices and grain analysis, you’ll get our 2018 lentils forecast. Or bundle the lentils outlook with another crop category like peas or chickpeas.
Save money and take your grain marketing to a new level.
The 2018 lentils forecast will be available next week to subscribers of this exclusive service.