Pea Prices in 2020 Diverge as Farmers Look Up and Abroad

Pea Prices in 2020 Diverge as Farmers Look Abroad

Pea prices are starting 2020 out on a bit of a divergent path, at least within the complex, as yellow pea prices drag lower while green pea prices soar. More acutely, we’ve seen green pea prices trade up above $14 CAD/bushel in many areas across the Canadian Prairies over the past month, whereas yellow pea prices have been hovering between $6.50 and $7 in most places.

Western Canadian yellow pea prices for spot movement through January 3, 2020

Intuitively, this leads to thoughts of where pea prices will go over the next few months, which will more than likely be a function of where pea acres are distributed for Plant 2020 (I hinted back in September 2018 that green peas could be the shining option for the 2018/19 crop). We’ll get into these questions and more in outlook for pea prices over the next 12 months.

Pea Prices Initially Hampered by Harvest

While Harvest 2019 was certainly a slog, for the peas harvest, production still came in strong in North America, up 25% year-over-year to 5.25 MMT. This is also a 10% increase above the five-year average. The increase was largely due to an increase in harvested acres (+30%) and yields in the U.S., and harvested acres in Canada (+20%). With an American pea harvest of just over 1 MMT, this is a solid rebound from last year’s smaller acres and yields. Ultimately, there’s plenty of peas to go around in the U.S., but due to tariffs from China and India, there isn’t as much leaving American ports. [1]

U.S. 2019/20 pea harvest production

In Canada, a harvest of 4.33 MMT is up 21% year-over-year and 11% from the five-year average. While StatsCan downgraded average Canadian pea yields by nearly 3.5 bushels per acre in their December estimate, it does match the five-year average and pretty close to last year’s haul. Intuitively though, this means that, like the U.S. there are more peas to work through for the 2019/20 crop.

Canadian pea exports and production estimates from AAFC in Decemeber 2019

Will Pea Exports Help Pea Prices?

As the chart above shows, Canadian pea exports are expected to climb only about 150,000 MT year-over-year to 3.4 MMT. A few years ago, the key to depleting stocks was India but as they’ve aggressively pushed for self-sustainability in pulses and the introduction of import tariffs in November 2018, India’s pea imports have dropped substantially.

That said, the rise of the pea fractioning market, both domestically and abroad, China has filled the gap left by India essentially leaving the market (NOTE: they’ve haven’t completely left the market, but they’re certainly not buying at the volumes seen from their highs in 2016/17). This in mind, Canadian peas exports are tracking 45% higher year-over-year with 1.24 MMT sailed through week 22 of the 2019/20 crop year.

Canadian 2019/20 weekly pea exports through Week 22

A few countries that are now solid competitors in the pea exports game include Russia, Ukraine, and Australia. Russia’s pea harvest was estimated to have touched 2.6 MMT this year, namely thanks to pea yields increase by 25% year-over-year to 21.4 bushels per acre, according to APK Inform. [2] Conversely, the Ukrainian peas harvest was estimated to have fallen 25% to just 583,000 MT, mainly because of planted acres falling 41% from last year’s area. [3] While these two players are competitors into the Asian market (albeit China has phytosanitary concerns about Ukrainian peas), they have a much more consistent market in Europe.

Australian farmers battled Mother Nature’s drought conditions for the third straight year and the result but a significant increase in planted acres helped production climb to 257,000 MT, up nearly 70% year-over-year. However, because India has started classifying peas by different types and colour, Pulse Australia is anticipating more green Dun and Kaspa-type peas to exported to India.

ABARES' December 2019 estimate of Australian pea harvest

Pea Prices Waiting on India

The ultimately question mark in the direction of pea prices continues to be what the pulses harvest in India will turn out to be. An extended monsoon rainy season meant a delay in the seeding of India’s winter/rabi crop, namely in the major producing states of Madhya Pradesh, Karnataka, and Maharashtra. Accordingly, private estimates of India’s total pulse crop harvest have been falling. Further, with 2019/20 Indian pulse crop demand estimated at 25.4 MMT, domestic stocks are razor tight, meaning they’ll have to import more pulses.

That said, tur/pigeon pea prices have risen by more than one-third compared to a year ago and the Indian government has flat out said that they’ll need to raise imports to limit price inflation. Complicating things is the smaller summer/kharif pulse crop harvest which is now estimated at just 8.23 MMT, down from an initial forecast of more than 10 MMT. [4] Since that supply usually alleviates any price shocks, the smaller harvest means that prices have climbed.

The bottom line is that India will likely need to import about 3 MMT of pulses with the India Pulses and Grains Association estimating that another 900,000 MT of pulses will need to be shipped in before March (AKA when the rabi harvest comes online). [5] Keep in mind though that, because chickpeas (AKA chana) are the largest pulse crop in India, the government is more likely to work on keeping chickpea prices lower to avoid more pea imports.

Where do Pea Prices Go in 2020?

There is certainly a lot of opportunity to the upside for pea prices if India continues to have harvest challenges. While moisture reserves are plentiful, this sets things up for a big rebound in the 2020 kharif harvest compared to the smaller haul mentioned above.

Here at home, there’s a lot of talk about the increased demand for pea protein. [6] However, plants are still being built and the additional demand isn’t likely to come online until late 2020 and beyond. Thus, while Agriculture Canada is estimating domestic demand for Canadian peas at just under 830,000 MT, it’s still not an eye-popping amount. That said, one of the bright areas of domestic demand has been in the feed market with feed pea prices tracking other feedstuffs very well.

Alberta feed pea prices through January 10, 2020

Currently, Agriculture Canada is forecasting Canadian pea ending stocks for 2019/20 to come in at 400,000 MT. this would be about 23%, or 74,000 MT more than 2018/19’s carryout and still about 27,000 MT or 6% below the five-year average.

Agriculture Canada's December 2019 pea ending stocks estimate

Undoubtedly, more farmers will chase the high green pea prices that we’re seeing and plant way more green peas this coming growing season. This will certainly put pressure on green pea prices, with the very real threat of them pushing back below $10 CAD / bushel. Conversely, since yellow peas are often a common substitute for chickpeas in India, yellow pea prices may find some strength in the first half of 2020 before stabilizing throughout the rest of the year. Ultimately, India’s pulses production will continue to hold the biggest sway over pea prices in 2020.

To growth,

Brennan Turner
CEO
FarmLead
TF: 1-855-332-7653
contact@FarmLead.com
@FarmLead on Twitter

COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.

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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