“Let the first impulse pass. Wait for the second.”
– Baltasar Gracian
A common narrative around agricultural markets depicts a group of buyers relentlessly trying to beat down the market price of a given commodity while growers attempt to defiantly hold their ground. In reality, no one really cares about the actual commodity price unless it falls below the cost of production and the cost of production is a number that is liberally interpreted. The other reality is that not much happens in Canada during a down market and for all their pomp and flair (and newsletters) buyers have very little to do with setting the price. We have just witnessed such an event with our old and new crop lentils. Grower bids have sustained major corrections over the past 60 days as destination markets struggle to absorb high priced product. Growers (en masse) failed to respond in a meaningful way even while watching their remaining inventory lose 30% of its value. When buyers needed to restock they discovered prices needed recover 20% to secure new merchandise from the bin.
The table below suggests that growers will continue to dictate how the market will progress through 2018. Carryout stocks are manageable, price bottoms have been tested and rejected by producers and current markets reflect the expectation the growing season to progress normally with bids remaining 2-10 cents below what growers are expecting for their 2017 lentil crop. The good news is that the market has been re-set and the probability for severe downward corrections is very limited. Timing is everything, but we are likely at the beginning of one of those coveted, slowly rising markets that actually profits everyone.