With the annual harvests winding down, IFT talks to industry experts about what to expect from pea and lentil markets in the coming months.

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With the annual pea and lentil harvests coming to a close in the United States, producers and traders in the main pulse-growing states of North Dakota, Idaho, Montana and Washington are taking stock and deciding how to optimize their market position at this key juncture.

This year the pea and lentil markets in the United States have followed decidedly different paths. On the one hand, peas saw an increase in acreage of about 31% compared to 2012, from 649,000 to 850,000 acres, according to the USDA June crop report. Meanwhile lentil trading activity has been slow in recent months following the USDA’s report of a 28% drop in acreage.

We spoke to industry representatives for the pea and lentil industries recently to hear their perspectives on what’s moving these markets and where things are heading as the new crop comes in.

U.S. Peas: Big Crop, Healthy Demand

Official harvest statistics for peas haven’t been published yet, but judging from acreage increases and yield reports (35/bushel according to Dustin Kreger of Columbia Grain), experts say there will be plenty of peas to go around, at least for the time being. That’s good news given that demand has been healthy for green peas on the whole, despite a weak Indian rupee.

“The United States is going to show a record yield in the pea crop this year for both green and yellow peas. Acreage obviously increased quite a bit on peas this year with the better values back in the spring. Even though some crops were late and there was some weather along the way, we still ended up with pretty ideal weather for pea growing and so far everywhere yields have just been outstanding,” says Jeff VanPevenage of Columbia Grain.

Last year’s pea stocks were completely exhausted by July 1, but the big incoming crop should be enough to keep prices afloat as bids continue to come in. However, that’s not to say that the current green pea market is a bottomless pit, as Mark Kok of Great Northern Ag points out:

“I think if you look at the USDA numbers, there was a little bit of an increase from some pretty low numbers on green peas over the last couple of years. So there are not a lot of green peas in the marketplace right now. Even with the big crop I think there’s still going to be very few green peas available come the end of the year,” Kok said.

Prices for peas have dropped slightly from early harvest levels, though they are still high enough to encourage farmers to market their peas as they hold on to lentils.

“Entering into pea harvest we were seeing grower bids at $11/bushel for green peas and $8/bushel for yellow peas. Prices have eroded right through harvest to where green peas are biding at around $9/bushel throughout Montana and North Dakota, maybe $10/bushel out in Washington and Idaho. Yellow peas have eroded down to about $6.50/bushel,” says VanPevenage.

U.S. Pea Production (100 cwt)

2010 2011 2012
Idaho 480 270 494
Montana 2,140 2,655 4,736
North Dakota 8,120 1,160 4,485
Oregon 189 154 198
Washington 1,292 1,386 1,540
United States 14,221 5,625 11,453
 

U.S. Pea Area Planted (1,000 acres)

2010 2011 2012
Idaho 31 16 27
Montana 220 190 315
North Dakota 430 85 235
Oregon 7 5 7
Washington 68 66 70
United States 756 362 654
 

VanPevenage says right now some of the fastest growing demand for U.S. green peas is coming from China. In general the Eurasian market for peas has been growing recently, driven in large part by demand for the no. 1 grade peas that the U.S. is known for.

“I’m doing a lot of business in Russia now,” he says. “If you look at history and statistics, there haven’t been a lot of U.S. peas going to Russia. Last year’s tightness in pea stocks allowed the U.S. to gain more market share. Bulgaria, Romania, Italy, Russia, Poland were all places that in the past you wouldn’t even be able to walk in the door because they’d been buying Canadian green peas forever. Whereas this year they’re saying ‘you know, I liked your quality. I want to do more business with you.’ So that’s helped open up our marketplace.”

“Six years ago China didn’t care one bit about no. 1 grade peas. All they cared about was ‘what is the cheapest pea we can buy?’ A lot of the green pea that goes into that industry is for the snack food industry. We’ve seen increases by leaps and bounds for grade no. 1 green peas going to China,” VanPevenage added.

U.S. Lentils: Low Demand, India Problem

The U.S. lentil market has been notably sluggish this year, with a substantial decrease in acreage, falling prices and weak demand from India due to a steady devaluation of its currency. Nobody’s panicking, but farmers across the board are holding on to their lentils until conditions improve.

On the production side, lentils fared relatively well despite some heavy rains, though some industry members suspect a dip in quality versus last year’s crop. USDA Bean Market News reported overall lentil harvesting at 75% as of September 9, though most of the traders we spoke to said for all intents and purposes the U.S. harvest is complete. Dustin Kreger estimated lentil yields at about 30/bushel.

“I know the USDA showed lentil seeding down about 28%. I tend to think it’s down a little bit more than that, probably more in the 35% range. We’ve had some pretty good rains throughout the northeast areas of Montana and northwest North Dakota over the course of the last five days, which is where the majority of that crop is being grown. I suspect the remaining quality in the fields is going to be suspect at best, mostly due to rain and water damage,” says VanPevenage.

 

U.S. Lentil Production (100 cwt)

2010 2011 2012
Idaho 513 351 384
Montana 3,359 2,717 2,145
North Dakota 3,927 824 1,880
Washington 858 840 845
United States 8,657 4,732 5,254
 

U.S. Lentil Area Planted (1,000 acres)

2010 2011 2012
Idaho 55 28 33
Montana 260 260 205
North Dakota 265 80 160
Washington 78 60 65
United States 658 428 463
 

The consensus among lentil industry members is that the weak Indian rupee has been a major blow for U.S. lentil export demand. For Indian traders paying in dollars and selling in rupees, there’s just no incentive to rush out and buy U.S. lentils when there are cheaper alternatives. Earlier in the year lentil prices were up in the $22/cwt range, but have since dropped to around $16/cwt, says VanPevenage.

“Certainly the lentil market is a dog, if you will. The Indian rupee has straightened out to about 68 to 1 on the U.S. dollar down from 54 back in April-May, so passiveness is probably the big word in India today,” says Kreger. He placed FOB Seattle port prices for lentils at $610/MT No. 1 Richlea, $650/MT No. 1 Viceroy/Eston, and $650/MT red lentil.

“India’s been absent in the lentil market. It’s actually been very, very quiet, which has been fine because U.S. farmers are not selling any lentils at these price levels. They’ve been trying to liquidate their peas as quickly as possible and holding onto lentils. There’s a little bit of European business going on but it’s not tremendous,” says VanPevenage.

“It’s a harder sell into India right now because the rupee is off. That’s kind of been dragging us down because they’re so much cheaper than our lentils in this area. It’s hard for European buyers to swallow that much of a difference in price, of 10 cents a pound,” adds Dan Bruce of BNP Lentil Company.

If and when India’s currency issues will be resolved remains to be seen and depends on a lot more factors than the price of lentils. However most of the folks we surveyed agreed that there’s not going to be a lot of trading activity until stocks fully deplete sometime around the end of the year.

“It’s going to be a pretty flat market I think until we get rid of most of our product which will probably be after the first of the year and then after the first of the year, if product runs short and the buyers are in need, then that’s when the market could move,” says Bruce.

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Charlie Higgins, IFT Journalist

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