Everyone is planting lentils in 2016. Or so it seems. According to Statistics Canada, lentil acreage is up 30 per cent over last year.
“A 30 per cent increase in lentil acreage is a significant increase over last year,” says Chuck Penner, owner and analyst at LeftField Commodity Research. “Lentils are not a special crop any longer, not with over five million acres being seeded this year.”
The vast bulk of the acres are in Saskatchewan at 4.86 million, up from 3.7 million in 2015. The balance of the 285,000 acres are in Alberta. “The real balancing act will be seeing how the market can absorb this much growth in production,” says Penner. “Growers will be really pushing the boundaries in 2016, and I’d strongly advise them to consider forward pricing at least a portion of their anticipated production to provide some risk control.”
The lentil market consists of red lentils and green lentils. Red lentils are pushing the acres to record highs as growers respond to two poor crops in the world’s biggest end-user, India. “Canada is the biggest exporter of red lentils into the global market, with Australia a distant second,” says Penner. “That’s pretty much the market right there. The million-dollar question now is – have we overshot market demand? In my opinion, that is a risk growers need to consider as they build their marketing strategy for this season.”
It’s very early in the growing season and it looks as if a potential drought has been staved off with timely rains over the lentil growing region, at least for now. “Everyone is a bit nervous about the market come fall, even if growers have contracts in place,” Penner explains. “Will the buyers live up to their initial commitments or will they cut back? That remains to be seen.” At this point, growers can at least breathe a bit easier and not worry about a crop failure.
Green lentils are a much smaller acreage crop, probably only 25 per cent of the 5.14 million acres. “Green lentils are a different crop altogether in many ways, a much more finicky crop,” says Penner. “Demand is more widely spread globally and it is relatively inelastic demand. I would anticipate that there might be a tighter supply of green lentils as they are also a much more quality oriented crop compared to red lentils.”
Penner sees very little upside reward from this point forward; however, he is anticipating downside pricing risk at the record high acres we have seen planted this year. “There are guys locked in at 35 – 40 cents per pound,” he says. “This is a historically high price. And there are still good forward price opportunities to be found. If you don’t have any of your production forward priced at this point, then I strongly advise you act – otherwise you are rolling the dice.”