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Pulse Market Insight - Issue #104

Posted: May 26, 2015 | By Communications Coordinator

What Effect Do Yields Have on Pulse Markets?

Even before planting begins, market analysts (including us) spill a lot of ink about seeded area to generate forecasts and outlooks. In a previous report, we admitted that most of these are simply educated guesses. The bigger unknown comes from the fact that yields – not acres – have a larger impact on crop supplies and the resulting market outlooks.

This year, moisture conditions are already quite variable in different parts of the prairies. Some places are still dealing with excess moisture while others would love to have those kinds of problems. That variability sets the stage for sizable swings in yield potential. In this article, we’ll look at some possible scenarios based on various yield outcomes and how that could change the market outlook.

For peas, farmers told StatsCan they would be planting 3.83 million acres of peas, although some have argued the actual number could be higher still. But if we use that acreage along with 5-year average yield (36.9 bu/acre) as the starting point, it would mean a 2015 crop of 3.74 million tonnes, roughly 200,000 tonnes more than last year. On the surface, that would mean comfortable supplies although export demand is expected to be strong.


If yields end up at the high end (44.3 bu/acre) of the past five years, it would mean a record 4.49 million tonne crop, 750,000 tonnes more than the average scenario. Suddenly supplies look a lot more comfortable or even burdensome. If on the other hand, yields end up at only 32.3 bu/acre, the low end of the last five years, it would mean a crop of 3.27 million tonnes and suddenly supplies get very tight.

Looking at lentils, the same thing applies. Lentil acreage should hit a new record and the scenario with the 5-year average yield of 1,518 pounds per acre would mean a crop of 2.25 million tonnes, also a new record. If yields managed to achieve 1,842 pounds per acre, the high point of the last five years, the crop would increase nearly 500,000 tonnes to 2.73 million tonnes. Even with strong export demand, that’s a lot of lentils. But if yields are compromised and drop to the 5-year low of 1,354 pounds per acre, the crop would be barely over 2.0 million tonnes and that would make supplies very tight in the face of heavy demand.

At this stage of the year with the crop barely out of the ground, it’s extremely risky to base the entire marketing strategy on high or low yields. That’s why it’s good to have a balanced approach that includes some forward pricing while leaving some crop unpriced. At an individual farm level, a high or low yield will mean changes to the percent of the crop priced.

For both peas and lentils, overseas export demand is expected to be very strong in 2015/16. That means the possible heaviness from high yields wouldn’t be quite as serious. At the same time, if yields end up on the low side, the market reaction could become severe. So there’s less danger of the market dropping hard due to a large crop and more upside potential if the Canadian crop is in trouble.

Just in case someone is getting ideas, it doesn’t help to try to manipulate the market by sandbagging the StatsCan surveyors either. For one thing, traders are generally skeptical of the StatsCan numbers to begin with. If the yield numbers look a little wonky, they’ll just disregard the survey results. Because of that, the StatsCan yield estimates have a very short-lived impact on prices. The “market” fairly quickly figures out how many peas or lentils are out there based on how easy/difficult it is to attract farmer selling. That becomes the real measure of yields and supplies.

Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.

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