Lentil Price Boom Goes Bust as Crops Recoup From Canada to India

October 20, 2016 11:11 AM
Lentil Price Boom Goes Bust as Crops Recoup From Canada to India

So much for the lentil shortage.

Prices for a food staple of vegetarians across the globe are plunging from record highs in April after Canada, the world’s top exporter, began its largest harvest ever and output rose in the U.S. and India, the biggest consumer. Supplies are increasing for other so-called pulse crops, including chickpeas and dried beans, signaling discounts from costs that had skyrocketed.

Lentil output is surging to an all-time high, eroding prices boosted by 2014 crop damage.

“Buyers will look to renegotiate contracts,” said Colin Topham, managing director in Vancouver for Agrocorp International, an agricultural trading company based in Singapore. “In rare circumstances, you’ll get defaults where they just simply won’t take the goods.”

Cheaper Beans

Expanding supplies may cut costs for food makers including General Mills Inc. that have been adding protein-rich legumes to breakfast cereals, energy bars and salty snacks. It’s also good news for India, where pulses are eaten at almost every meal and a quarter of supply is imported. Prices began soaring in 2014 after rains damaged Canada’s harvest and India’s weak monsoon reduced domestic output. The rally encouraged farmers in North America to plant more.

Canada will see its lentil production jump 36 percent this year to a record 3.2 million metric tons, while pea output climbs 44 percent to an all-time high of 4.6 million tons, the government estimates. In 2014, the lentil crop shrank 12 percent.

In the U.S., growers expanded the area planted to lentils by 89 percent this year to a record 930,000 acres, much of that coming at the expense of land previously used for wheat, U.S. Department of Agriculture data show. Production will more than double to about 623,000 tons, from 239,515 tons in 2015, said Tim McGreevy, the chief executive officer of The U.S. Dry Pea & Lentil Council in Moscow, Idaho.

More Selling

“There’s quite a bit higher percentage of selling going on than we’ve seen historically,” McGreevy said. “A lot of that is because they can’t make any money on their cereal grains. They’re holding on to their cereals, and they’re selling their pulses.”

Rising supplies have sent prices sinking. Top-quality laird lentils tumbled 34 percent to 52.85 Canadian cents a pound in Saskatchewan as of Oct. 19, down from 80 cents in April, according to Brian Clancey, president and senior market analyst at Vancouver-based Stat Communications Ltd.

A wholesale price index for pulses in India fell 5.4 percent last month, the most in six years, after touching a record high in July, according to the Press Information Bureau of India. Lentils, chickpeas, black grams and pigeon pea are a staple for most of India’s 1.3 billion people, and demand has been growing. The legumes are often cooked with curry spices, sauces or butter and eaten at most meals with rice and Indian flat bread.

U.S. Price

In the U.S., the price of spot richlea lentils in early October was about where it was a year earlier at 30 cents a pound, but down from a peak of 52 cents earlier in 2016, said Justin Flaten, president of JM Grain in Great Falls, Montana.

“All the information we’re getting from customers is that they’ll uphold their contracts,” said Flaten, whose company sells to countries including India and Sri Lanka. “We’re really counting on our customers to fulfill their contracts.”

Without futures markets for pulses, buyers have fewer ways to hedge price risk, which means there may be more pressure this year to renegotiate contracts signed when the crop value was higher, according to Topham at Agrocorp.

Strong Demand

“The prices went up so high because we had very tight stocks with extremely strong Indian demand,” said Murad Al-Katib, chief executive officer of Saskatchewan-based AGT Food and Ingredients, the world’s largest exporter of peas and other pulses. “You go from historically high prices to normal to average prices and you have an adjustment period.”

Demand remains strong, and pulse crops are more profitable compared with grains and oilseeds, Al-Katib said.

Turkey and India -- the two biggest lentil buyers -- have increased their consumption, and China has developed a market around extracting the fiber and starches from the dried peas to use in food products, Topham said.

“A lower price environment means increased global consumption,” Topham said. “I think prices have found somewhat of a bottom.”

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