The trend for most pulses has begun to reverse through October. After observing the market for the past 3 weeks, I think we have finally settled into safer price ranges for the 2013 crop.
The main driver for this change has been the producers ability to hold stocks. There is a lot of good product in bins. However, growers are no longer totally relying on pulse crops for cash flow which allows them to be much more selective about when to sell. Also, the entire crop is now safely stored removing the urgency to create the bin space we saw earlier in the year.
In general, I would say growers are content to sit on remaining stocks until late January. I believe they will do this regardless of the market moves through November and December. If prices go up, it will signal even further increases in 2014. Small dips in bids will no longer frighten producers into action.
Expect to be trading hand to mouth on limited supplies through the remainder of 2013.
Good Luck. Dave
New Crop Yields and Prices
Here are some numbers to consider going to help make sense of pricing this crop year compliments of StatCanada’s specialty crop production summary.
Considering yields in lbs/acre on the big crops year over year.
Lentil Yield 2012 = 1348, 2013 = 1583, Increase 17%
Pea Yield 2012 = 1975, 2013 = 2492, Increase 26%
Lentil prices to growers averaged about 23 cents through 2012. Reds averaged 21.50, Large Greens averaged similar prices through 2012. All things being equal, growers will be targeting about 18 cents fob in 2013 to make the same return.
These numbers are below the 3 year average which has tended to sellout most crops. Current markets clearly reflect these adjusted values. However, we are getting more limited grower participation than expected due to the hangover of higher prices still being expected by growers despite the yields which should allow them to sell lower for the same return.
The relative good quality of the crop also makes farmers feel that they have earned a price similar to previous lower yield years.
Pea prices varied widely between Green and Yellow peas. Green averaged around $14/bu after the big rally at the end of the year. Therefore, prices around $10.50 for WGP would produce similar returns. Yellows averaged $8.65/bu, Therefore a $6.50 provides the same return due to the better yield..
Similar comments can be made for peas as lentils. Current grower bids meet the yield/price ratio almost exactly. Farmers however, are still basing selling decisions on prices achieved in previous years. Eventually, barring a disaster in another producing market, growers will eventually release product based on fundamental returns seen in the current market.
Making sense of historical grower prices. For Fun, let’s look at 3 volatile markets over the last 30 months. Laird #2, Green Peas #2, Red Lentils #2.
Lairds: Hi $35/cwt; Lo $19/cwt; Avg $24.50/cwt; Range: $365/mt
Market has been characterized by irregular demand and disciplined grower sales. While there has been a largest range between high and low growers have not chased down the market. Releasing product into available demand near the high end of grower ranges. With the 3 year average around 24 cents. The majority of growers will be reluctant sellers until prices become closer to the 3 year average. Around 22 cents.
Green Peas: Hi $17/bu; Lo $7.50/bu; Avg: $11/bu: Range $350/mt
Market has maintained steady demand and has charted into new territory over last 12 months due to empty pipelines and sold out crops. Growers have become accustomed to $12 peas. Even though prices moves have been dramatic. As markets stabilize expect prices to move closer to the 3 year average of $11 / bu. We are currently having trouble getting growers to sell below that level.
Reds: Hi: $25.50/cwt; Lo: $17/cwt: Avg: $20.75/Cwt: Range: $220/mt
Reds have achieved the greatest stability in the past 3 years as crops have tended to sell out every year and demand has remained good. There was an expectation with this years large crop and general weakness in many Ag markets that reds would follow lower than they have. Currently bids of $18 are not generating any interest from producers who have generally covered their cash and bin space issues. Growers remain hopeful that bids will move closer to the the average 3 year bid of $21 cents before releasing the bulk of the crop to the market.
At the moment, export markets remain slow with disciplined growers not relenting to lower prices to help to jump start demand. Expect all of these markets to eventually gravitate to their 30 month averages by spring 2014.
Have a great week.