Marketing Challenges for North American Dry Beans
March 29, 2006
U.S. producers bemoaning the price of dry beans might want to look at the bright side of things at least youre not in Canada.
A number of producers in Manitoba dealt with record rainfall, which hurt production. A narrower exchange rate these days also means a lower value for Canadian-produced dry beans. Several years ago, a price of $19/cwt beans equated to $30.40 Canadian. Today, its about $22.75 Canadian.
Thats an $8 difference in value, right off the top, says John Thompson, dry bean sales manager for Thompson USA Ltd, Blenheim, On. I think those who are trading internationally understand (the effect that the U.S./Canadian exchange rate has on dry bean value) but a lot of Canadian producers dont understand the U.S.-Canadian price relationship. Its a double whammy. Not only do we have soft markets, Canadian producers have lost more on the currency. Canada right now is not the cheapest producer. I would say that today, the cheaper producer of beans is the U.S.
Thompson pointed out during his presentation at Bean Day 2006 that Canada also lacks a key government program outlet to help reduce bean supply food aid, which in the U.S. comes in the form of the federal PL 480 Food for Peace program.
Canada has basically wiped out all its food aid programs. Theres none left anymore. Fight for that (PL 480), keep it as long as you can, because its a fantastic program, Thompson says. Its U.S. dollars tied to buying U.S. products, and its a great thing.
05 Supply,06 Demand
Dark Red Kidneys Thompson estimates that 73,400 acres of production in the U.S. and Canada in 2005, at an average yield of 17.5 bags per acre, would be about 1.285 mil cwt, and with 04 carryover, total supply is about 1.343 mil cwt. Estimated demand of 1.2 mil cwt would leave an 05 carryover of 143,000 cwt.
Pretty steady demand, but significant oversupply, and the dark red markets, when they are oversupplied, they are difficult to move, Thompson says. Generally I try to encourage growers who produce these types of beans to try to contract; it helps keep their returns more viable.
Pintos Thompson notes that North Dakota and Minnesota account for about half of North American pinto acres, and Nebraska, Colorado, and Manitoba, another 30%. All told, North American pinto acreage was up about 16% in 2005, with production at about 13.5 mil cwt, assuming an average of 15.5 bags per acre. Even if Mexico is a strong buyer of beans this year, there will still be a carryover of about 2.5 to 3 million cwt.
The pinto market thus far has seemed fairly balanced between grower selling and end user buying. With the overall numbers, you would certainly expect the market to soften, but there are factors that may play in as well, Thompson says. If there are any production problems after June 1, it could affect values through harvest.
Blacks A 20% drop in 05 acreage combined with production problems in Mexico and consistent demand means well almost clean up on blacks, says Thompson.
Navies While harvested acreage was down over 30% in Manitoba, it was up over 80% in Ontario, up 40% in Michigan, and up about 1% in Minnesota/North Dakota. Overall North American navy harvest acreage was up about 11% from 2004, and with total supply estimated at about 7.2 mil cwt, and demand at about 6 mil cwt, that leaves a projected carryout of over 1 mil cwt.
So navy beans as well are in an oversupply situation, although there tends to be more forward contracts with navies, which makes it not quite as liquid as some of the other markets, Thompson says. Forward contracting makes the market a little more predictable on returns, and it doesnt seem to have the volatility as pintos or blacks.
A Guess at 06 Acreage
Thompson took an early guess at how bean class acreages might change in 06 compared to 05 very speculative, he says, based on discussions with others in the industry about how growers in the U.S. and Canada might react to the supply/demand picture for the various bean classes.
Not surprisingly, the short supply and a good price is likely to boost 06 acreage the most for blacks. In Michigan, producers consider it a gamble crop, because it has such volatility. Of course, they dont put all of their acres into blacks, but its one they like to play with. Its one that could be oversupplied, but Mexico could come into the market strong again, so its hard to know.
Overall North American dry bean acreage is expected to increase in 2006. How it all allocates out, Im sure you (growers) will all decide that, he says.