Rains Boost Canadian Yield Prospects
OTTAWA - Sep 12/19 - SNS -- Pulse and special crop production in Canada is expected to be higher than thought last month, with combined output for the sector totalling 8.079 million metric tons (MT), up 20% from last year and 4% above last month's Statistics Canada forecast.
Higher yield estimates for peas, lentils, chickpeas and canaryseed more than offset reductions in forecast yields for dry edible beans, mustard seed and sunflower.
The September yield forecasts were calculated as of August 31 based on coarse resolution satellite data from Statistics Canada's Crop Condition Assessment Program, data from Statistics Canada's field crop reporting series, and agroclimatic data.
Starting in 2019, an extended yield model based on parcel level crop insurance data received from Manitoba Agriculture Services Corporation was used for Manitoba.
It is worth noting that last week's July 31 stocks in all positions estimates were higher than hoped for both peas and lentils, but not at levels which surprised markets.
It found that the 2018-19 marketing year ended with 388,000 MT of peas on farms and in commercial positions, down 40% from last year. Markets had hoped for a number closer to 300,000 MT. Lentil inventories finished last season at 654,000 MT, down 25% from last year, compared to hopes the number would not push past 600,000 MT. Chickpea residuals were 10,000 MT higher than expected at 100,000 MT.
Higher production estimates are expected to combine with higher than hoped ending stocks from the 2018-19 marketing campaign to result in an overall increase in ending stocks next summer. Combined residuals for peas, lentils and chickpeas could advance from 1.14 to 1.36 million MT.
Record High Pea Supply
Statistics Canada now expects this year's field pea harvest to total 4.67 million MT, up from 3.58 million last year. Given a carryover of 388,000 MT and assuming imports end up close to 60,000 MT, the country is looking at a record high available supply of 5.12 million MT of peas, compared to 4.29 million last year and the recent five year average of 4.63 million.
Imports by India are not expected to improve during the 2019-20 marketing year unless that country's rabi season harvest is a failure.
While India's monsoon season was slow to start, heavy rainfall during the last half of the season has resulted in an above average rainfall accumulations across much of the country, which would be expected to encourage rabi season plantings. The only question facing markets is the extent to which delays harvesting kharif crops affects seeded area and yield prospects during the coming rabi season.
Exporters are somewhat concerned about prospects for selling peas to China's livestock feed sector and the degree to which competition for demand from European suppliers will affect demand for peas for milling. The imposition of higher import duties on U.S. origin pulses should reduce that country's ability to compete for demand, suggesting Canada will remain the dominant supplier.
There is a chance Canadian field peas exports could advance from 3.25 million MT in 2018-19 to a forecast 3.44 million in the coming marketing year. Canadian domestic disappearance should also increase, with offgrade peas being diverted into livestock feed markets and as new fractionation plants become operational.
Despite this demand optimism, there is a strong chance residual supplies of peas will jump from this summer's 388,000 MT to around 740,000 a year hence. If correct, the stocks to use ratio would jump from 9.9% to 16.9% or enough product to cover two months of normal demand.
Wet harvest conditions should have a greater impact on the quality of green than on yellow peas. This has the potential to see prices paid to farmers and export asking prices for split green and No 2 Canada or better green peas to advance during the coming marketing year as available supplies tighten.
By contrast, price movement in yellow peas may be dependent on both the pace of grower selling and the needs of processors and exporters. This could see more volatility in prices for much of the season.
Above Average Lentil Supply
Improved yield forecasts for lentils have more than offset the year over year decline in carry-over stocks to result in an increase in available supplies of product compared to last year.
This year's harvest could reach 2.52 million MT, up from 2.09 million last year. Residual supplies of lentils dropped from 873,000 MT last year to 654,000. If imports are at their recent five year average of 40,000 MT, the available supplies of lentils across the 2019-20 marketing year will total 3.21 million MT, up from 3.01 last year and the recent five year average of 3.0 million MT.
Given harvest conditions, there is a significant risk the fair average quality (FAQ) of Canada's green lentil crop will be Extra 3 Canada or No 3 Canada. In past years, red lentil quality has held up better than greens in poor harvest conditions, suggesting there remains a chance the FAQ could end up as No 2 Canada, but with a fair amount of quality variation within the grade.
Most of the lentils carried over from the previous marketing year should be No 2 Canada or better, suggesting the country does not face a fundamental shortage of good quality product.
However, growers are just as aware of this year's quality issues as markets, with the result the willingness of growers to sell good quality product may be more important than demand in determining price direction. This could see average spreads between the No 3 and Extra and No 2 or better lentils widen.
Premiums for good quality lentils will be moderated by the aggressiveness of U.S. exporters. They are selling sized lentils o compete with Canadian large greens and have been willing to be highly competitive in asking prices to buyers European and Latin America.
Only active subscribers can read all of this article.
If you are a subscriber, please log into the website.
If you are not a subscriber, click here to subscribe to this edition of the STAT website and to learn more about becoming a subscriber.
