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Pulse Market Insight - Issue #112

Posted: September 28, 2015 | By Communications Coordinator

Latest Developments in India

Now that there’s a clearer picture about the size of 2015 Canadian pea and lentil crops, focus is shifting to the demand side of the equation. While crops have ended up performing a little better than expected earlier when the drought was at its worst, there aren’t huge supplies, in spite of StatsCan bumping up previous years’ supplies. The key question is how demand will stack up against this year’s supplies.

Of course, India is the central part of the demand picture for both peas and lentils and there are plenty of developments recently that give us clues about upcoming demand. Most of these clues point to firm demand again in 2015/16 that will help consume Canadian pulse supplies.

The most important factor in the understanding Indian demand is the level of its domestic pulse production. In its summer (kharif) season, pulse production depends on the level of southwest monsoon rains, starting in June. This year, the rains started well but faded in mid-summer and ended up reducing yields. The most important kharif pulse crop is tur (pigeon peas) and production can affect demand for Canadian green lentils, which act as a substitute. The Indian government recently estimated this year’s tur crop at 2.61 million tonnes, the lowest since 2009/10. This should boost demand for Canadian and US green lentils, which are already in fairly short supply.

The monsoon rains in early fall also determine soil moisture reserves for the winter (rabi) pulse crops, which include peas, lentils and chickpeas. In the past couple of weeks, the late monsoon rains have been surprisingly strong, helping relieve some early concerns about getting the winter crop planted. That said, planting the rabi crop hasn’t even started yet, so it’s far too early to draw any real conclusions.

Until there’s a little more certainty about the rabi pulse crop, the low supply of pulses in India is keeping prices well supported, especially for chana (desi chickpeas) and red lentils. As a substitute for chana, yellow pea prices in India are also steady but haven’t shown the same strength as some other pulses.

Price behaviour is one of the best signals of actual supply levels. As supplies of new-crop peas and lentils from North America start to hit the Indian market, prices could be pressured but that may not last all that long. As a matter of fact, prices in India had dipped a few weeks ago but have already bounced back. That’s not to say the rally will continue, but simply that demand is still keeping a floor under the market, at least for the short-term. The rabi crop situation will then take over and determine the medium to longer term outlook.

Weekly import arrivals of key pulses haven’t really turned higher yet, but that’s not because of weak demand. Simply, the larger shipments of new-crop peas and lentils from Canada haven’t arrived yet. Those volumes should start to show up in the next week or two and could limit further upside price moves in India. Then a month or two later, the Australian desi chickpea crop will start arriving, which will likely pressure chana prices, and possibly spill over to yellow peas.

At this point in the year, Canadian farmers have had opportunities to sell yellow peas and both red and green lentils at historically high prices. Because these price levels are profitable, a more aggressive marketing approach is suggested to take advantage of the situation. Prices are expected to move mostly sideways in the short-term, allowing more opportunities to sell. The next moves will be determined by rabi crop situation and the weather uncertainty means prices could still go in either direction, starting in late 2015. That’s why it’s important to have a large portion of the 2015 crop sold before then, while still leaving some smaller quantities in case the Indian weather turns dry and prices rally.

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

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