Lentil Harvest & Commentary - Kevin Hursh

[charliep]

The question always comes to how the processor/broker covers their risk with an act of god clause - i.e. cover a sales to an end user with a priced farmer contract. The obvious answer is to build bigger margins into their pricing but there is a cost and still risk.

Maybe the answer is an improved suite of weather based risk management products for processors or an insurance product that covers grade risk.

[dave4441]

They trade there way thru the risk by trying to be long or short depending on the circumstances of the mkt, it is not done by larger margins in a current AOG system. Also adds liquidity to a small volume market when on any given day the buyers overseas may or may not be buyers of product.

There may be a better way with insurance, would have to know the costs I guess.

[gustgd]

Viterra no longer makes you buy out contract if not #2 but have a 5 cent discount on extra 3.
In my experience their buyers are still learning and defaulting to lower grade. Like wmbonisis says learn what grades are. Don't take less.

Question. How are other exporters looking for exportable supplies ?
IMO right now is harvest pressure, (wide basis) and by Jan things will be 5 cents higher maybe 8 cents by march???.
But What is happening in importing countries. Does Turkey/Asia have a crop?
Little help?

[checking]

The lentils were diseased out, and a write off even 45 days after seeding in this area. It didn't matter whether growers had hit it with multiple applications of fungicides, or not. I'll say there was rain during a third of those days (300 mms) with the other 300 mms in the following 60 days.

Question - India has monsoons, always equivalent to 800 mms plus, grows pulses, some of which only Larry could pronounce! Do they ever struggle with pulse diseases, or is this just our issue?

[charliep]

Will have to do a little research on Monday for a couple of your
questions.

one comment would be to look at seasonality and lentil prices. Lentils
into Europe are for soups - winter food. There is also seasonal
demand for other types of lentils ahead of the rabi crop harvest in
India. There is seasonality to lentil prices although not as much with
all lentil classes.

Will also have to watch the Canadian situation including Monday. We
are a significant portion of world lentil trade - particularly on the large
greens. Grade patterns will also be important. I eat lentils at home
and spend some time looking in clear packages at the raw product -
quality is important.

Also have been to Turnisia and looked at how sold there. Likely
similar other consuming regions. Product is displayed in the local
markets in nice neat piles. I suspect hand picked to remove poorer
quality seed. The consumers expectation about quality of the product
(seed is very visible as not processed) is no different than mine.

[charliep]

Suspect Indian has some of the same disease issues we do. You also
have to separate their Khariff crops (summer/hot/monsoon season) and
their rabi season (winter/cooler/drier). The rabi season will be planted
over the next few weeks/harvested Feb./Mar. and are more like what we
grow here.

[dave4441]

Indian and Turkey do not have ascohyta/anthracnose issues becuase it is produced under very dry conditions normally. They have other issues, I believe stemphylium being on of them. India is a very hot country in general. Off the top of me head. I think they onl get 10 bu crops or so, because of the heat.

The problem I see with the mkt is that Turkey harvested 550,000 MT (or somewhere in that area) this june, 350 previous year and 55 the year before that. India was also very hot buyer previous 2 yrs. Turkey for now is not buying reds where the previous 2 crops in Canada had both Turkish (especially Turkish demand) and Indian demand. India today is where a large portion of the current shipping is going and they have been selling there purchases back to Canada prior to the weather issues in Canada this fall, becuase they anticipate a good crop (remember that India has been a long term net EXPORTER of lentils) (rabi-planted dec, harvested feb) becuase of current moisture conditions and because they have a pile of producted being shipped for them now. Today red mkt is extremely limited for actual demand/new sales, and for most buyers wanting product to sail in dec/jan, they have to buy today.

You can slice up the current red production anyway you want but reality is there is big acres and some big yields. Also some 0 yields, but acreage will likely compensate. Austrailia can be a wild card, and mkt is currently trying to figure out where that crop sits, as it was one of the things that drove lentil proces last fall in Canada. Heat wave.

Anything can hit the mkt as new info over the next few weeks and change what I have said here, but feeling we grind lower on reds with current info. Some companies were in a major shipping squeeze and took losses to get product moving and meet vessels commitments.

[dave4441]

Checking-missed your question. Moonson rains are now and prior to the Rabi crop. Rabi crop (lentils) uses rain from moonsoon during Kariff crop and tends to be the drier season. Very little pulses grown during the kariff crop, except pigeon peas, which are grown during kariff crop. Green lentils of course are the substitite for pigeon peas. Rabi is desi and lentils.

India is less bullish because current Kariff moisture levels are good so anticapte better then avg conditions for Rabi crop. Anything can change that as feb is a long ways off.

[checking]

Thank you charliep and dave441.

Makes sense compared to a predictable monsoon stop that allows for a dry harvesting period.

Have a safe one.

[riders2010]

No risk to grower with act of God??? Yeah no crop someone is gonna pay the imputs? That's the biggest pile of bullshit going that the producer has no risk. Less crop the end users pass it on to the consumer, less crop for producer what happens? nothing take what is given. All contracts we sign are a gift for the end users they know how high they can rip the consumer that's all.

Look at all the lentils locked in at 20 cents and the market is header where, who's benefiting from that risk, sure as hell isn't the producer that locked in.