Opportunities continue to slowly grow in Canada
by Chuck Penner, Leftfield Commodity Research
There has not been a whole lot of news for faba bean markets recently. Partly, that is because the market has settled into a more stable supply situation, at least in Canada. After the excitement in 2015, seeded acreage has settled back to roughly 100,000 acres for the past two years. It is too soon to say how the 2017 yields will turn out but with average yields, production would be somewhere in the ballpark of 120,000 tonnes.
Another reason for the quieter faba bean market is that Canadian exports have dropped in 2016/17 compared to the last two years. The full-year total for 2016/17 will be around 14,000 tonnes, compared to 24-25,000 tonnes in the previous two years. Largely that is because of renewed competition from Australia, along with the recent emergence of Baltic countries as competitors in the key Egyptian market.
The reduced Canadian exports mean the large majority of the 2016 faba bean crop needed to be consumed domestically, mostly as livestock feed. That has not really been a problem as the feed protein market is easily large enough to absorb Canadian faba bean production with little difficulty. And as livestock feeders become more comfortable with using faba beans, prices remained at least at par with feed pea values.
There are two parts to the 2017/18 market outlook for faba beans. For the smaller export market, production and quality from competing countries will determine whether there is room for Canadian volumes to rebound in the coming year.
Production among major producers is forecast to decline in 2017 by roughly 100,000 tonnes or six per cent from the previous year. Even so, the crop from these regions is estimated at nearly 1.5 million tonnes. Keep in mind, this total includes both human consumption and feed faba beans, but the bottom line is there seems to be plenty of beans available from export competitors, and that will limit Canadian export opportunities in 2017/18. Faba bean prices in these key markets have been flat to lower in recent months, which confirms the comfortable supply outlook.
The rapid emergence of production from the three Baltic countries — Lithuania, Latvia, and Estonia — is also worth noting. It is not just Canadian farmers who have noticed opportunities with faba beans and responded with production. Production for the Baltic region is expected to exceed 300,000 tonnes for the third straight year and now that it has become an important crop there, it is unlikely to fade away anytime soon.
This crowded export picture confirms ideas that the large (80-90 per cent) majority of the Canadian crop will need to be consumed domestically, the second part of the 2017/18 faba bean outlook. And this market segment looks a little more favourable.
The main reason behind our optimism is the result of challenging crop conditions in Western Canada and the northern United States (U.S.). Faba bean prices in Western Canada have generally been following feed peas but are also influenced by values in the larger feedgrain complex. Early reports are indicating pea yields in Canada will end up below average and U.S. production will be down a lot more.
At the same time, barley prices in Alberta feed markets have strengthened considerably and will be supported by reduced yields in Canada and smaller crops in major exporting countries. Based on early crop outlooks, the Western Canadian feed market will be well supported in 2017/18, and that will spill over to feed peas and by extension, faba beans. The only caution in this outlook is that, at the time of this writing, U.S. corn and soybean markets have been under pressure.
The bottom line for 2017/18 is that the export market for tannin faba beans will be steady but unspectacular due to the strong competition from other countries. Meanwhile, the feed market will be firm-to-higher, following allied markets.
From a longer-term perspective, Canadian faba bean production and consumption can continue to expand, but will need steppedup market development efforts. If supplies of faba beans are able to stay fairly steady, feed users will be more comfortable making them a regular part of their rations, and the higher protein levels can add to faba beans’ value. Beyond the feed market, the rapid expansion of pulse protein consumption in human and pet foods could provide the next bigger opportunity, but will need to boost processing capacity to build that market.