Pulses Patience: Opportunities are on the horizon

Posted on May 25, 2018

The outlook for pulses in the long term is anything but boring for Prairie farmers, both in its opportunities and challenges. Our share of the pie may be shrinking, but it’s a piece of a growing pie.

All factors impacting crop values are reflected in pricing, both short and longer term. Often the short-term issues can feel like they are the most dynamic as prices swing in response to the latest forecast, an updated government report, or a surprise in demand. Longer-term factors, such as structural shifts in demand or overall trends in production, are much slower moving compared to the day-to-day market action.

However, at this point, the pulse market is the exact opposite. Shorter-term challenges have kept prices depressed and movement sluggish. The most apparent roadblock is Indian government policy that has stopped the flow of pulses into what is typically the world’s number one import market. This happened at the same time global production is coming off of two big years, leaving stockpiles of inventory and reduced opportunities for shipments. To sum up: the pulse market today is a bit of a drag.

But the story is a lot more interesting looking further out on the horizon. The combination of rising populations and rising incomes points to steadily increasing global consumption from the more ‘traditional’ markets. It’s no secret that India is striving to be self-sufficient in pulses, but this may be a stretch on a sustainable basis. Actual demand may outstrip the current assumptions on what will be consumed in future years, not to mention the inevitable production hiccups that occur in any given year.

Demand will continue to grow in other export markets as well. China has become a significant and growing buyer, while many other countries have increased their purchases of peas and lentils as well, a trend that should continue.

Perhaps the most exciting demand opportunity is the rapidly growing vegetable protein market where there is the potential for pulses to grab a much larger share of consumption. Pea protein currently makes up approximately two per cent of the vegetable protein market creating a vast potential to capture a more substantial portion of a market that is expanding. Since much of it is from high-income consumers, the demand is also less price sensitive.

There is also a growing demand for protein in animal feeding. The pet food market has been a welcome source of demand during this time of slow export movement, and their volume of usage is projected to increase steadily. In the case of livestock, pulses will need to price in competitively relative to, e.g., soybean meal, something that typically doesn’t happen when pulse values are higher. However, it does help to provide a floor.

As exciting as the demand story is, competition is increasing as well. Canada remains an essential exporting country, but other countries are expanding their footprint in global markets as well. This not only includes the expected culprits such as Russia, Ukraine, the United States and Australia, exports are also increasing out of other countries in Eastern Europe, Asia, and Africa. In many individual cases, the export volumes are small, but even a small cargo here and there adds up displacing potential Canadian sales. These countries are looking to increase their production going forward, particularly when prices and global activity recovers.

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