December 2015

Well, that was interesting.   Lentils.  $330 in 30 days.    Traders continue to stare into unknown territory every day as current and potential future stocks dry up.

What is more interesting is how this year shows how little impact supply and demand charts can have on current prices.    Check out the 5 year lentil summary from stat pub data combined with November grower prices.

2010          2011              2012                  2013               2014                 2015               2016 (forecast)

Stocks                      2.07 M       2.42 M         2.42 M              2.72 M             2.79 M             2.54 M           3.4 M   ?

Usage                       1.2 M         1.5 M             1.95 M               1.94 M             2.4 M               2.3 M             2.8 M ?

Red $ (Nov)            28               19                   20                      20                    30                     50                    37 Traded

Green $ (Nov)        40              30                   21                      21                      40                     60                    40 Traded

The chart makes no sense to a economics student.   When supply goes up, prices should go down to encourage more demand.   When supply dips prices should go up to limit demand and encourage acres.   Should be easy, but it has not been working that way.    Each year takes on its own personality allowing supply and demand to stay relatively flat while prices oscillate wildly.    Seeding intentions for 2016 are generally accepted to increase toward 5 million acres.    With decent yield we can easily produce an additional 1 million MT of supply for 2016/2017 season.   While the stocks will be welcome through October 2016, it is sobering to think about what three and a half million mt of available lentils from Canada will mean to the markets by December.   As the knowledge permeates the general trade this time next year I think the risk could be significant.   Trade carefully.   Best Regards and Happy Holidays.