Spend Matters welcomes this guest post from Jara Zicha, market analyst at Mintec.
Prices for lentils have fallen sharply in Canada since May this year. So, what is behind the latest price decline and will recent weather setbacks put an end to this downward trend?
Twenty years ago the lentil market was dominated by India and Turkey. Canada, however, has now been crowned the king of lentils. Production of lentils in Canada has grown exponentially over the past 40 years, and Canada also holds the top spot as the world’s largest exporter — around 80% of production is exported and extensively traded to India, Turkey and Egypt.
Canadian lentil farmers have experienced great returns over the last 10 months as other world regions have fallen short. The price surge at the end of 2015 was mainly driven by increased demand for Canadian exports as production in India fell dramatically as a result of dry weather. As the Indian government imposed stock limits on pulses in some of the Indian districts, and approved higher imports, prices rose by over 60% between November 2015 and March 2016.
Thanks to favourable prices, acreage in Canada for lentils is set to increase 30% in 2016 to 5.1 million acres, while areas seeded with wheat (-1%), canola (-4%) and flaxseed (-32%) are all projected to fall. Ending stocks have been forecast at 650,000 tonnes, sharply up from 75,000 tonnes last year. Amidst soaring production and rising stocks, lentil markets have plummeted 33% since April this year, returning to price levels seen last year before the price hike.
However, it isn’t all rosy for Canadian farmers. In August, adverse weather hit lentil production in Saskatchewan, raising concerns over yield, quality, final acreage and uncertainty over a record crop — reports vary in the extent of the damage caused by the rain. Certainly the implications could be severe should the crop fall very short of initial estimates.