The past year has been incredibly challenging for pulse growers. We entered the year at the tail end of a period of extraordinary prices. The end result was an unsurprising increase in seeded acreage which led to a boom in global production. While some correction of prices wasn’t a surprise, the abrupt end to Indian pulse imports was unexpected. The combination of more abundant supply and a lack of purchasing from Canada’s most prominent customer resulted in a sharp decline in prices. Product without a home meant significantly larger stockpiles left on the farm. Based on current expectations, there is no immediate price relief in sight.
Many people in the trade expected Prairie farmers would be reducing lentil and pea acres significantly, perhaps by as much as 25 per cent or more. However, when Statistics Canada came out with their first estimate for 2018 planting intentions, the reduction was far more modest at just an 8 per cent drop for lentils, and roughly a 5 per cent decline for peas.
The question is: why did farmers plant so many pulse acres when, on the surface, it wouldn’t appear to make sense?
First, farmer planting decisions are made within the context of their entire potential crop mix. Even if the outlook for pulse profitability isn’t robust on its own, it may still look relatively attractive due to other farm decisions. For example, the price prospects for many cereal crops didn’t seem appealing during winter and early spring, allowing pulses to stack up relatively well, even if in isolation they weren’t as promising as in previous years.
Second, farmers look at the longer term sustainability of their operations. Crop rotations based on good agronomic practices are more critical than aggressively chasing what is ‘hot’ in any given year, buffering the year-to-year swing in acres. For example, even though the canola outlook was the most promising for many Prairie farms, the overall increase in seeded area will be very modest as cereals, pulses and other crops maintain their critical roles in the rotation. Pulses, in particular, have agronomic benefits that provide additional incentive for farmers to sustain their acres.
How much do the higher-than-expected pea and lentil acres matter to the market outlook? In short, not a great deal. Yes, it’s not helpful to prices when more acres get planted than had been expected. However, at the same time, changes in yield tend to be larger than the swings in seeded area, so weather is usually a more significant factor in determining price direction.
More importantly, the single biggest factor influencing pulse prices in the foreseeable future is Indian policy, and when/if there might be some opening of their borders to imports.
Until the world’s largest buyer comes back to the table, the entire complex will remain overburdened, regardless of whether we planted a few extra acres or not.