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Pulse market analysis

Brian Clancey, Senior Market Analyst and Publisher, STAT Communication

PULSE MARKETS ARE starting the 2019–20 marketing campaign with a fair amount of uncertainty. Not only are there worries about crop quality in parts of Canada and the United States, but doubts remain about market access in some destinations.

Frictions with China are making field pea exporters nervous. India’s continued use of high import duties and calls for imports of more types of pulses to have volume limits has made some lentil exporters uncertain. Increased tensions in the Middle East have the potential to interfere with trade flows.

WEATHER IMPACT ON WORLD MARKET

The weather could also become an issue for other parts of the world. Mexico continues to suffer from unusually dry conditions, which should result in a further reduction in dry edible bean production. But, diets appear to be changing in the country and consumption seems to be trending lower. Brazil is also worried about its conditions, which could result in a modest reduction in national output.

Meanwhile, Australia is concerned that the late withdrawal of the monsoon from India.

In releasing the October seasonal weather outlook, Andrew Watkins of the Australian Bureau of Meteorology said, the country is “likely to see warmer and drier than average conditions for the coming months. That is largely due to a record strong positive Indian Ocean Dipole, which leads to drier air than usual over northwest Australia that supplies much of Australia’s rainfall.

“The increased odds of warmer than average days, coupled with a very dry landscape and a likely late start to the northern wet season, give a clear indication that we’re likely to see more heatwaves than normal.”

That may not have much impact on this year’s pulse harvests in Australia but has the potential to not only reduce summer grain and oilseed production but get next year’s pulse crops off to a poor start.

FABA BEAN PRODUCTION

This year’s faba bean harvest in Australia is expected to reach 301,000 metric tonnes (MT) from 194,000 hectares, compared to 217,000 from 178,000 hectares last year. However, stocks in the country tightened considerably across its 2018–19 marketing year, with the result available supplies could be unchanged at 325,000 MT.

The implication is that if exports are similar in 2019–20, residual supplies should decline, leaving markets

vulnerable to a supply problem if next year’s seeded area or average yields drop because of dry growing conditions. As it stands, the price performance of faba beans should stimulate an increase in seeded area to at least 245,000 hectares in 2020. But, poor seeding conditions could see that number drop, while a dry year could see yields fall below average.

Canada’s faba bean harvest is expected to reach 91,400 MT from 58,600 acres. Yields are expected to be above average because of a wet growing season, but because of frost events before all fields were fully matured, there could be a high proportion of off-grade beans. Unfortunately, faba beans can look good even when the interior is green. That has the potential to result in huge quality claims if farmers and processors do not make sure the beans are mature by breaking some open.

An Opportunity for Canada to Fill a Gap

Egypt is the world’s largest buyer of consumption-quality faba beans. Suppliers in Canada, Australia, France and the United Kingdom compete for available demand. The United Kingdom is once again facing quality issues with its crop, resulting in exporters focussing more on livestock feed markets than those for human consumption. That creates some opportunities for a good quality product from Canada to fill in gaps left by Australian exporters as long as all market participants pay attention to quality.

Faba beans remain a small part of the North American dry edible bean industry. Production of all other classes is expected to reach

1.48 million MT in Canada and the United States, compared to 1.54 million last year and 1.71 million in 2017. If this summer’s carryover is 327,000 MT, available supplies of all classes of beans in the two countries will drop from 1.89 to 1.8 million MT.

Production in the United States is expected to reach 1.127 million MT, down from 1.172 million last year and below the recent five-year average of 1.21 million. Canada’s crop is expected to reach 356,100 MT from 350,950 acres, down from 367,000 MT from 363,000 acres last year.

DRY EDIBLE BEAN PRODUCTION

Production will not be broken down by class in the United States until the December crop report. But the data suggests the pinto bean harvest will drop from almost 416,000 to around 406,000 MT, while black bean output will advance from 237,000 to 270,000. Total white bean output also looks to be down. Navy production is expected to drop from 185,000 to 161,000 MT, while great northern slips from just over 53,000 to under 50,000 MT.

The shifts in dry edible bean output in the two countries come at a time when Mexico expects a smaller crop. Government estimates remain optimistic, but it would not be surprising to see the harvest drop from 949,000 to 861,000 MT. In recent years, dry edible bean consumption has averaged 1.16 million MT per year. The implication is that imports may need to expand from an estimated 199,000 MT in 2018–19 to 217,000 to prevent a fundamental shortage of product.

Under the North American Free Trade Agreement, Canada and the United States maintain duty-free access to the market. But, Mexico will open quotas for suppliers in other countries to help prevent prices for imported beans from rising too sharply. Most imports are coloured beans, resulting in net exporting nations like Argentina and China looking for chances to ship product to Mexico.

Production in China has been declining in recent years, while Argentina’s capacity to export large quantities of black beans to Mexico depends in part on how many beans Brazil needs. That country expects the 2020 harvest to slip under three million MT, compared to its recent five-year average of 3.05 million. If the harvest is smaller, imports could reach at least 155,000 in 2020, compared to an estimated 152,000 this year and just under 110,000 MT in 2018.

This combination of events suggests demand for dry edible beans will remain relatively stable across the 2019–20 marketing campaign.

Potential quality problems make it more important for growers to understand what they have in their bins and make sure immature beans because of frost are not accidentally shipped to human consumption markets. Reputation is more important than price.