Brian Clancey, Senior Market Analyst and Publisher, STAT Communications – Spring Pulse Beat 2022
THE REALITY OF last year’s drought has been fully accepted by markets, resulting in unusually strong prices for many pulses. As a result, attention is switching to what will happen this year to seeded area and growing conditions.
Competition for acres will be strong in all areas where pulses are grown, with oilseeds such as canola attracting significant attention from farmers. So far this marketing year, the potential gross income performance of canola has outmatched all grains, pulses and specialty crops.
If you look at prospective gross income as a percentage of its previous three-year average, so far this season, future average gross returns for pulses are generally above that average versus wheat, barley and durum, but well under versus canola.
There is a relatively strong relationship between those numbers and whether seeded areas will rise or fall in most years. If prospective gross returns are above their previous three-year average, area tends to increase and when it is below, area tends to decrease.
Versus wheat, this has been true 78% of the time for all classes of lentils since 2001, 61% for peas and 83% of the time for chickpeas. Versus durum, 67% of the time for lentils, 72% for peas and chickpeas; versus canola, it held true 72% of the time for lentils, 56% for peas and 83% for chickpeas.
Stiff competition from canola for land use this spring will likely result in little overall change in total pulse area. At the moment, it could end up around 8.419 million acres, down from 8.746 million last year and below the recent five-year average of 8.836 million.
If yields are at their recent five-year average, total pulse production in Canada will advance from 4.337 to 6.327 million metric tons (MT), just below the recent five-year average of 5.356 million.
Looking at the United States and Canada as one zone, area in the two countries could advance from 12.245 to 12.285 million acres, but combined output might jump from 6.313 to 9.492 million MT. The impact this has on available supplies will be moderated by tight ending stocks in the region. It may advance from 7.976 to 10.0 million MT, well below the previous five-year average of 11.335 million.
Overall disappearance is expected to return to more normal levels across the 2022–23 marketing year, suggesting the combined carry- over may only increase from 511,000 to 601,000 MT of all types of pulses.
Increases in residual supplies are expected for lentils, peas and coloured beans, while residuals for white beans and chickpeas could decline over the coming marketing campaign. Overall, prices paid to growers are expected to be lower on average than what has been seen in the 2021–22 marketing year.
That is not surprising. Prices offered to growers for most pulses are sitting in decile nine territory. This means they have been higher less than 10% of the time since 1988. That does not mean new record highs cannot be set. However, it indicates the risk of waiting for better prices is increasing over time.
The big issue facing growers is that most North American pulses are not competitively priced outside the region. Two factors had powerful influences on prices paid to growers between harvest and November. One was the need for processors and exporters to find enough product to cover sales commitments. The other was a bulge in North American domestic demand as the food industry strove to cover shortages of U.S. origin products and refill retail pipelines. Both needs are primarily covered, resulting in an overall decline in trading activity. The problem is asking prices for many North American pulses are too high to compete with products from other origins.
Weather is always a factor affecting both seeded area and the yield potential of fields. The fact several key areas in western Canada remain somewhat dry will be a factor in the minds of many growers, and last year’s drought underscored the risks.
None of the long-term forecasts are looking for drought in western Canada. Some long-term forecasts call for cold and wet conditions through May in western Canada and parts of the northern United States, followed by unusually warm weather. If accurate, cold conditions may impact seeding progress for lentils, chickpeas and peas both there and in western Canada.
May is a critical month for seeding in western Canada. Historic weekly seeding progress data from Saskatchewan shows that, on average, 10% of the intended area for lentils is in the ground by the end of April, compared to 6% for peas and 2% for chickpeas. Progress typically passes 50% for peas and lentils by the middle of May and exceeds 93% by the end of May.
Wet weather delayed seeding in 2020, creating a lot of anxiety over the risk of frost before harvest. In the end, yields were above average and crop quality around average. Significantly, the delays did not have much impact on area, with land in all pulses jumping from 8.9 million acres in 2019 to 9.243 million in 2020.
The last time western Canada faced a lengthy drought period was between 2001 and 2003. Seeded area in those years dropped from 4.92 million acres in 2000 to 3.682 million in 2001 and 2.681 million in 2002 because dry conditions left farmers unwilling to risk seeding pulses.
The bottom line is as attractive as new crop markets are at the moment; if growers do not believe they have a chance at average yields, they may switch to crops with lower average costs per acre and/or higher income potential.