FarmLead’s 2018 Lentil Prices, Market Recap

As we turn the calendar on 2018 lentil prices and markets, it’s a time of reflection, but also one of planning. That being said, as a company, FarmLead is also reflecting on 2018 and planning for 2019 with some new products and tools! We’d love for you to have some input in the evolution of FarmLead (including some early access to try out some new tools) and so, before continuing your reading, please answer this 4-question survey. Thanks!

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FarmLead’s 2018 Recap of Lentil Prices, Markets

The 2018 calendar year saw lentil prices start off very weak as the market was still trying to digest the impact of India implementing tariff import duties on all pulses coming into the country. While the impact to all major pulses – lentils, field peas, and chickpeas – was felt immediately, lentil prices continued to be battered throughout 2018.

Technically, the first wave of import tariffs came into effect in November 2017, and the impact was felt immediately. However, the market took nearly a fully year before finding new lows for lentil prices in North America. Even then, sporadic trade policy from the India government continued to weigh on lentil prices, notably the continued increase in import tariffs, most recently as of this past November!

Ultimately, as we neared the end of 2018, and with the North American harvest out of the way, the market started to find to find the lows for lentil prices. Further, values have started to improve on the news of some poor moisture conditions in India. However, while there is some bullish buzz for peas and chickpea prices heading into 2019, lentil prices have a tougher hill to climb as demand isn’t as robust.

Indian Lentil Prices Backed by Government

The biggest factor in chickpea prices in 2018 was without a doubt, India, and it was certainly negative. [1].

Following the largest and second-largest harvest of pulses ever in India of 25.23 MMT in 2017/18 and 23.13 MMT in 2016/17, the government implemented the market-changing import tariffs on all pulses as domestic prices started to fall. Even as 2018 calendar year progressed, Indian prices of pulses have continued to falter, despite the Modi government has continued to drive the message home that they will support Indian farmers through the election in 2Q2019. [2]

As recently as October, we saw the Indian government raise minimum support prices for lentils yet again. This sort of protectionist policy is likely to continue into 2019 as the government is currently targeting 24 MMT of pulses to be harvested in 2018/19.

As we flip the page to the 2018/19 crop year, the most recent estimate of the 2018/19 kharif crop of pulses in India was for 9.22 million metric tonnes (MMT). This is just above last year’s kharif crop of 8.9 million tonnes (as per the final estimate from the Indian government), but it is 29% more than the 5-year average of 7.15 MMT. This includes the record kharif crop harvest of 2016/17 of 9.53 MMT.

Big 2018/19 Indian Lentils Harvest

Something to consider is the current rabi crop that’s in the ground right now in India. It won’t be harvested for a few months but the crop is already dealing with less moisture than usual. As such, it’s our feeling that nearly the only thing that matters for lentil prices is the Indian rabi crop.

Specifically, the last week crop report of the calendar year says that an average of only 2.8 inches of rain has fallen across the country so far in the rabi crop growing season which started on October 1st. This is 43% below the average of nearly 5 inches of rain that supposed to fall over the 3-month period. If we look even further back to the monsoon period between June and September, total rainfall was 8% below the long-term average.

In major pulses production regions of Uttar and Madhya Pradesh, precipitation levels are about 80-90% below the seasonal averages. We should keep in mind though that reservoir levels in these areas are slightly above average this year, which would be slightly positive for crop production.

On that note, through the end of December, 34.76 million acres of all pulses have been seeded in India. This would be about 9.5% below last year’s acreage of 37.11 million acres by this time in the growing season. For perspective, the 2018 acreage of pulses in India planted thus far is about 3.5% larger than the 5-year average of 33.6 million acres planted by the end of December.

Specific to lentils (or masur or masoor as they’re called in India), 4.05 million acres have been planted in India this rabi crop growing season. This is actually 3% less than the 4.17 million acres planted by the same time last year but nearly 8% more than the 3.76 million acres of lentils usually planted by the end of December (5-year average).

On that note, lentil prices are finding some strength on these acreage and moisture reports, albeit have leveled out more recently.

India Lentil Prices 2018 Performance

Lentil Prices Appreciate Smaller Aussie Crop

As previously mentioned, the 2017/18 was a record crop of pulses in India. The opposite happened for Australian lentils production in 2018/19.

Lentil production in the Land Down Undaa was negatively impacted by the drier growing conditions there in 2018. This was exacerbated by the fact that Australian producers reconciled with poor lentil prices by planting less lentils. Total production came in at just 343,000 MT, down 29% year-over-year.

Dec 2018 ABARES Australian Chickpea Harvest

All things being equal though, lentil production in Australia doesn’t have too much of an impact on international lentil markets. That being said, when there are less lentils to go around, this should be intuitively supportive of lentil prices.  

Lentil Prices Not Helped by US Crop

Although American lentils acreage seeded in 2018 dropped by 29% from 2017, lentil production rebounded thanks to yields rebounding so significantly.

The USDA have estimated that the American lentil harvest in 2018 will come in just under 400,000 MT. This is nearly 17% higher than production in the previous year of just under 340,000 MT. Compared to the five-year average of a bit more than 322,000 MMT, 2018/19 American lentil production is nearly 24% higher.

2018 U.S. Lentil Production vs Yields

For U.S. lentil yields, the average haul per acre caem in at 1,159 pounds, or 19.3 bushels per acre. This is 58% better than last year’s dismal average of 732 pounds per acre (12.2 bushels per acre) but it is still about 3% below the 5-year average.

Harvested U.S. lentil acreage dropped significantly in 2018, down 26% from 2017, which saw more than one million acres combined. In 2018 though, Montana’s harvested lentil acres dropped 28%, or 190,000 acres, to 480,000. North Dakota lentils acreage combined fell 26% year-over-year, or 65,000 acres less than 2017/18, to 185,000.

Considering the fact that the majority of the US lentils crop is off the green variety, it is a bit bearish for green lentil prices, relatively speaking.

Correction for Canadian Lentil Production

The lentil harvest in Canada was still relatively big in 2017 but it was slightly offset by the aforementioned smaller lentil production in the U.S. due to the drought there. All things being equal, we saw a bit of a correction of Canadian lentil production in 2018 as individual countries started to review their acres, relative to lentil prices versus other cropping options.

Specific to Canadian lentil production, the most recent estimate from Statistics Canada put the 2018 harvest at 2.09 MMT, down more than 18% year-over-year. 2018 lentil yields were actually the same though as the five-year average at 20.8 bushels per acre.

2018 Canadian Lentil Production and Yields - StatsCan

From a balance sheet standpoint, there’s a lot of lentils available to start the 2018/19 crop year. However, thanks to a strong export campaign being forecasted by Agriculture Canada, 2018/19 ending stocks could fall to 700,000 MT, down 20% year-over-year (We’ll dig more into the outlook for the 2019 lentil market in early January).

AAFC Estimates of Canadian Lentils Market (Production & Exports)

However, the optimism for 1.8 MMT of Canadian lentil exports might be a bit optimistic as through Week 20 of the Canadian 2018/19 crop year, less than 170,000 MT of lentils have been shipped out of the country. That is up nearly 50% from the same week though in the 2017/18 crop year.  

2018-2019 Week 20 Canadian Lentil Exports (Cumulative)

2018-2019 Week 20 Canadian Lentil Exports (Weekly)

It is worth mentioning that these exports are only from licensed CGC exporters. If we account for the unlicnesed exports, the numbers start to add up. Here’s how it looked for Canadian lentil exports from unlicensed players in the 2017 calendar year as an example.

There is also some buzz that there’s going to be more domestic demand for pulses as consumers are changing their eating habits, but in all honesty, this demand is quite small relative to the size of Chinese and Indian markets. [3]

Turkey Hurts Lentil Prices

In the middle of the North American growing season, it appeared that there was some strength being found for lentil prices. Then the Turkish Lira collapsed due to trade and political turmoil between the U.S.A. and Turkey and the impact was immediately felt on lentils prices.

On one hand, the U.S. administration had imposed tariffs on steel imports from Turkey. On the other hand, Turkey was very adamant that the U.S. is hosting some political adversaries of President Erdogan. Also, at the time, Turkish credibility on the financial markets was weakening as Erdogan was threatening to exert more control over the economy.

The bottom line is that the Turkish currency had a free fall in mid-August and it started to have a ripple effect, hitting other countries such as India where the Rupee also lost ground against the U.S. Dollar.

How is this relevant to lentils?

Well, the weakening of Turkish and Indian currencies is really a double-edged sword.

A weaker currency is going to make these two countries’ exports more competitive on the international markets. However, the purchasing power of the Turkish and Indian importers would be severely compromised and thus, a bearish factor lentil prices.

In 2018, Turkey has been a relatively big buyer of Canadian lentils, a positive sign given the absence of India for Canadian lentils. With the significant weakness in the Lira though, that pace of lentil exports started to slow.

Very explicitly though, currency wars in 2018 joined the bearish camp of factors affecting lentil prices..

Lentil Prices Finally Rebounding

On that note, looking at today’s lentil prices, values in Western Canada have started to rebound a bit, notably for small red lentils This is mainly attributed to the speculation of the slightly drier conditions in India as well as some seasonality in terms of international buying. All things considered, it’s nice to see that as 2018 comes to a close, lentils prices have started to find some strength.

Saskatchewan Small Red Lentil Prices - 2018 Performance

Saskatchewan Large Green Lentil Prices - 2018 Performance

Saskatchewan Medium Green Lentil Prices - 2018 Performance

Saskatchewan Small Green Lentil Prices - 2018 Performance

As we head into 2019 though, there is more of a correction to be made in terms of acreage for the 2019/20 crop year. We’ll dig more into that in our 2019 lentils outlook found on our FarmLead Insights page.

To growth,

Brennan Turner
CEO
—-
FarmLead – North America’s Grain Marketplace

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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