CROPPERS weighing up their area designated to lentil production may be “sowing into a void”, according to Rural Directions agribusiness consultant Chris Heinjus, as price indicators are non-existent going forward.
“Pulses have become an important part of a farm’s gross income, particularly lentils, and in some areas, they have become even more important than cereals,” he said.
“But the market at the moment is reasonably static and looking forward, it is our view prices will not be positive.”
Mr Heinjus believed there were a few reasons for the lack of positive prospects, one being a bigger harvest in India.
“India is what drives pulse prices,” he said.
“Harvest in India was not as good as expected, but was still double last year’s.
“There has been talk of an import duty in India, possibly up to 25 per cent, and a compulsory methyl bromide fumigation at the point of origin. Generally when trade barriers are introduced, the country’s crop isn’t doing badly.”
Mr Heinjus said Canada – Australia’s biggest competitor – should be watched, particularly its sowing intentions.
“We are seeing a significant carryout of stock in Canada – 1.8 million tonnes in pulses alone,” he said. “Plus we expect the Canadian sowing intention to be higher this season, along with Australia’s.
“That will impact the marketplace, particularly if India’s demand has shrunk.”
Mr Heinjus said India’s methyl bromide import policy was creating an advantage for Australia, but could be only short-lived.
“Canada avoids methyl bromide use, which is giving us some competitive advantage in Australia, reflected in improved old crop prices in the past week or two,” he said.
“But it won’t be a gamechanger. Canada will fix the problem as their production season is about to commence.”
Mr Heinjus said growers should budget on $500/t for lentils.
“We have seen quite a large downward trend from the highs of two years ago to where we are today,” he said.
“Last year the price came off a bit, but production made up for the shortcomings in price.
“If your numbers work at $500/t, and pricing comes in at $700/t, you’re laughing.”
The large amount of grain being held on-farm and in the system could result in a large carryout from the 2016-17 season, abating any positive outlook for wheat prices.
“If we see a reasonable amount of cereal production at the global level, prices will come off even more,” Mr Heinjus said.
“We need to almost lose a production zone – the United States, Europe or the Black Sea – for our wheat prices to improve. And even if that happened, any issue could be buffered by carryout stocks.
“Growers need to be mindful of that going forward.”
Mr Heinjus said growers should budget on $210-$230/t for APW, while barley budgets should be about $160-$170 for F1.
One of the bigger success stories of last year was canola, which Mr Heinjus expects should significantly increase in production this season.
“It will depend though on the timing of the break – a later break may see less going in the ground,” he said.
Mr Heinjus said canola budgets should be about $500/t for best risk management.