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A Similar Bean Market Situation in Canada
September 18, 2006

Like most grain, oilseed, pulse and specialty crops markets these days, dry edible bean prices in western Canada have been increasingly volatile with a bullish bias. Hot, dry weather has hurt yield prospects similarly to other crops although the degree to which supplies will be cut from earlier expectations remains highly uncertain.

Regardless, off-contract prices for all types of dry beans are starting to perk up already, even before the final outcome is known in any of the main producing regions. The market began to be concerned with yield potential having been reduced in the northern
U.S. bean growing states of Minnesota, South and North Dakota a few weeks ago. Since that time, dryness concerns have arisen in Manitoba as well. Similarly to the case of spring wheat, hot dry weather looks to have prevented pods from filling properly and caused some heat blast in later-planted flowering crops.

Further east however, dryness has not been a problem for dry bean crops in 2006. Michigan and Ontario have both experienced heavy rains this season, which has not been ideal for yield and quality prospects. It appears yields in these areas will probably come in closer to normal levels than further west.

As in the case with most markets today, this yield uncertainty is so far just a lot of talk, with it being still a few weeks too early to say anything definitive about a supply shortage or surplus resulting in 2006/07. But also like other markets, it wouldnt be a good idea to sell today because of this uncertainty. Demand for dry beans is relatively stable and the 2005/06 carryout not relatively as tight as for some other crops this year, but demand is also inelastic meaning cash premiums can rise sharply in times of shortage.

Of all the dry bean types, blacks could have better upside potential today because carryout supplies from last year were already quite tight. Relative to other types of beans, they had the best contract prices available for 2006, due almost entirely to the need to re-generate a supply base.

But because of the more certain starting acreage base, and with
Michigan being a particularly important producer of black beans (where crop conditions havent been as severely dry this summer), the likelihood of rebuilding stocks to more comfortable levels is better. If the Manitoba black bean crop ends up in good shape too, black beans wont have as much rally potential related to a shortage developing later on but in the short term, the market should remain sensitive to talk of yield shortfalls because of the tight starting supply base.

Manitoba, farmers are reporting yield expectations to now be less than earlier in the summer. The crop started with excellent moisture conditions and was quickly established in the absence of the problematic rainfall seen in previous years. Now, with the problems south of the border becoming more real, potential shortfalls in Manitoba has been lending solid support to local prices overall.

Prices having started out the year (2006/07) at historically poor levels in and of itself helps limit downside risk going forward. Yield concerns could become bullish depending on final outcomes and harvest conditions in all of the main bean-growing regions.

Louis Dreyfus Canada Ltd has good market commentary from a Canadian perspective (this was a July 31 report) online at  click on the Rathwell,
Manitoba grain terminal location.


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Northarvest Bean Growers Association | 50072 East Lake Seven Road | Frazee, MN 56544
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