Dec 08/08: Canadian Field Pea Exports Slow
Category: News
The first 60 days of the marketing year were really good for peas. A record volume was exported in August and September, with India taking over 400,000 metric tons (MT) in September. If current forecasts hold true, almost a quarter of all field peas that will be exported from Canada this year shipped in those two months. But, just as remarkable is how quickly export demand has faded.
Until official trade data is available from Statistics Canada, the only indication of the health of the export trade comes from the Canadian Grain Commission and the Canadian Ports Clearance Association. Their data reveals that by the middle of November, pea exports through bulk grain terminals are now down almost 180,000 MT from last year. This does not mean that exporters for the entire marketing year will be down as much, but it does raise questions about where field pea prices will go during the balance of the marketing year.
When you are trying to answer this question for yourself, there are couple of things you need to bear in mind. All food products are renewable and it, or a substitute, is being grown somewhere in the world at any given time. This means that shortages are always cured. Secondly, when a food item is not consumed, that demand is lost forever. You compensate for that problem by having as many customers in as many different parts of the world as possible. As usage drops off in one region, we try to expand sales in another.
All of this affects the price which end users are willing to pay for peas, lentils, chickpeas or dry edible beans. When demand is strong, prices tend to be supported or rise. By contrast, when we are creating demand, prices tend to be weaker to encourage buyers to try or use more of our products. As it turns out, this year's field pea markets are providing a mini-lesson for these ideas.
Prices started the season on a strong note as exporters strove to cover huge yellow pea sales commitments to India in September. Even though they were trending lower, grower bids were very strong in July and August as markets tried to convince you to sell as many peas off the combine as possible. As soon as exporters knew they had covered all their needs for shipment from Vancouver in September, they lost interest in buying peas. On August 29 you could sell yellow peas for $7.78 per bushel. A week later, bids were down to $6.65 per bushel. Grower bids have since slipped another 40 cents per bushel, which hardly seems like a sign that there are any problems with exports.
World markets are very different. Export asking prices for whole yellow peas are down sharply. They started the 2008-09 marketing year at U.S. $405 per metric ton. They ended August at $350 on a delivered track Vancouver basis. By the middle of November they had collapsed to $265 per metric ton, with exporters saying prices are still not pulling consumers in through the doors. The only reason grower bids have not fallen as much is that the Canadian dollar fell from 97 cents at the start of the marketing year to 81 cents by the middle of November.
Processors and exporters are worried about buying more peas from growers than they can sell. This is reflected in the fact the grower share of the export asking price for yellow peas fell from 77% in August to 70% by mid-November. The situation is no better in green peas, where the grower share of the export market has plunged from 77% to 60%. Markets for green peas are much higher because of tight supplies, and efforts to slow down the pace of demand to ensure there are enough peas to last the season.
Price is not the only reason demand for pulses has slowed. Exporters and importers do not trust one another. Exporters doubt the ability of importers to pay. Buyers know some traders are having trouble maintaining positive cash flow. There are numerous stories about peas and lentils having been loaded into containers or railcars and not getting to port on time. Sometimes, containers roll from one ship to the next. Too often, the cargo loads to a ship after the contractual shipping period has expired. Sometimes buyers accept the late shipment. Sometimes they demand compensation. Sometimes they refuse to take the cargo and the exporter needs to resell it. Given the high average price paid for most pulses still leaving Canada, shipping delays and contract disputes are having a bigger than usual impact on cash flow.
What does this mean?
The average export selling price for peas and lentils will be significantly lower than it was last season. It will probably be down over U.S. $100 per metric ton for yellow peas, along with green and red lentils. The drop should be less for green peas and kabuli chickpeas. You will be protected from most of the decline as long as the Canadian dollar is around or below 80 cents.
Demand for field peas from human consumption markets will be down over last season. Total demand will be down unless sales to local feed mills and livestock producers improve. This means that the amount of peas left on farms in western Canada will be up by the end of the marketing year.
But, prices for pulses will not be down any more than they are for wheat or canola. The income potential from peas and lentils will still be high enough this season that it will not discourage people from planting these crops next spring. Based on that, I would not want to be one of the people who still have a lot of peas or lentils left in their bins at the end of the marketing year.
By Brian Clancey
Originally published in the December, 2008 edition of the Saskatchewan Pulse Growers Pulse Market Report. Reprinted by permission of the author.
Until official trade data is available from Statistics Canada, the only indication of the health of the export trade comes from the Canadian Grain Commission and the Canadian Ports Clearance Association. Their data reveals that by the middle of November, pea exports through bulk grain terminals are now down almost 180,000 MT from last year. This does not mean that exporters for the entire marketing year will be down as much, but it does raise questions about where field pea prices will go during the balance of the marketing year.
When you are trying to answer this question for yourself, there are couple of things you need to bear in mind. All food products are renewable and it, or a substitute, is being grown somewhere in the world at any given time. This means that shortages are always cured. Secondly, when a food item is not consumed, that demand is lost forever. You compensate for that problem by having as many customers in as many different parts of the world as possible. As usage drops off in one region, we try to expand sales in another.
All of this affects the price which end users are willing to pay for peas, lentils, chickpeas or dry edible beans. When demand is strong, prices tend to be supported or rise. By contrast, when we are creating demand, prices tend to be weaker to encourage buyers to try or use more of our products. As it turns out, this year's field pea markets are providing a mini-lesson for these ideas.
Prices started the season on a strong note as exporters strove to cover huge yellow pea sales commitments to India in September. Even though they were trending lower, grower bids were very strong in July and August as markets tried to convince you to sell as many peas off the combine as possible. As soon as exporters knew they had covered all their needs for shipment from Vancouver in September, they lost interest in buying peas. On August 29 you could sell yellow peas for $7.78 per bushel. A week later, bids were down to $6.65 per bushel. Grower bids have since slipped another 40 cents per bushel, which hardly seems like a sign that there are any problems with exports.
World markets are very different. Export asking prices for whole yellow peas are down sharply. They started the 2008-09 marketing year at U.S. $405 per metric ton. They ended August at $350 on a delivered track Vancouver basis. By the middle of November they had collapsed to $265 per metric ton, with exporters saying prices are still not pulling consumers in through the doors. The only reason grower bids have not fallen as much is that the Canadian dollar fell from 97 cents at the start of the marketing year to 81 cents by the middle of November.
Processors and exporters are worried about buying more peas from growers than they can sell. This is reflected in the fact the grower share of the export asking price for yellow peas fell from 77% in August to 70% by mid-November. The situation is no better in green peas, where the grower share of the export market has plunged from 77% to 60%. Markets for green peas are much higher because of tight supplies, and efforts to slow down the pace of demand to ensure there are enough peas to last the season.
Price is not the only reason demand for pulses has slowed. Exporters and importers do not trust one another. Exporters doubt the ability of importers to pay. Buyers know some traders are having trouble maintaining positive cash flow. There are numerous stories about peas and lentils having been loaded into containers or railcars and not getting to port on time. Sometimes, containers roll from one ship to the next. Too often, the cargo loads to a ship after the contractual shipping period has expired. Sometimes buyers accept the late shipment. Sometimes they demand compensation. Sometimes they refuse to take the cargo and the exporter needs to resell it. Given the high average price paid for most pulses still leaving Canada, shipping delays and contract disputes are having a bigger than usual impact on cash flow.
What does this mean?
The average export selling price for peas and lentils will be significantly lower than it was last season. It will probably be down over U.S. $100 per metric ton for yellow peas, along with green and red lentils. The drop should be less for green peas and kabuli chickpeas. You will be protected from most of the decline as long as the Canadian dollar is around or below 80 cents.
Demand for field peas from human consumption markets will be down over last season. Total demand will be down unless sales to local feed mills and livestock producers improve. This means that the amount of peas left on farms in western Canada will be up by the end of the marketing year.
But, prices for pulses will not be down any more than they are for wheat or canola. The income potential from peas and lentils will still be high enough this season that it will not discourage people from planting these crops next spring. Based on that, I would not want to be one of the people who still have a lot of peas or lentils left in their bins at the end of the marketing year.
By Brian Clancey
Originally published in the December, 2008 edition of the Saskatchewan Pulse Growers Pulse Market Report. Reprinted by permission of the author.
Gill wrote: