Lentils Continue to Have Fundamental Support
The market is supported thanks to tight supplies heading into harvest and now an extension to India’s import tariff relaxation. With recent strength, we made an additional recommendation to sell 15 percent of your 2020 red lentil crop at 28 cents per pound, picked up at the farm. That sale brought us to 50 percent sold for red lentils.
We think there will be support in this market for the near term, but producers are encouraged to make a move.
Canada’s lentil situation
Lentils are primarily grown in Saskatchewan with small volumes produced in south and central Alberta. Harvest has essentially wrapped up with Saskatchewan 99 percent complete and Alberta 97 percent complete. Heading into the crop year, supplies were tight. July 31 stocks were estimated at 60,000 tonnes, which is the tightest level seen in years. Planted area is forecast to be higher but the low beginning stocks will keep supplies light.
Plus, demand is expected to remain strong. We hit record exports in 2019/20 at 2.7 million tonnes, which exceeded 2019 production. Production is forecast to be higher, year over year, thanks to the boost in acreage. But we still are facing a tight balance sheet — and that is assuming exports will decline to 2.4 million tonnes.
Then there is India
As expected, India extended its lower import tariff for lentils. The current level for non-U.S. lentils is 10 percent versus the normal 30 percent. The latest extension is for lentils arriving by Oct. 31. FBN leans towards India again extending the lower tariffs. That’s because the main lentil crop is a rabi crop, meaning that planting season is approaching but harvest is months away. If prices are high now and stocks are snug, India will continue to need lentils until fresh supplies hit the market in 2021. The Indian government is set on increasing domestic production, though, and just increased its minimum support price (MSP) for several rabi crops including lentils. The MSP for lentils was boosted the most versus other commodities, both percentage wise and absolute value wise — up 325 rupees to 4,800 rupees per 100 kilograms. This is expected to result in additional lentil acreage and will likely reduce export prospects in 2021/22.
FBN's take on what this means for the farmer
India is expected to again extend the lower tariff import level given that fresh supplies are months away. For now, Canada will be a key beneficiary for the lower import tariff through Oct. 31. Australia’s harvest hits later in the year but assuming another extension, the lower tariff could benefit Australia after harvest sets in during November. Regardless, the lentil market will likely remain supported in the near term.
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