By Larry Sprague
Kelley Bean Co.
Editors note: A review and preview of dark red kidney, light red kidney and the great northern bean markets was the subject of Larry Spragues presentation at the 27th annual Northarvest Bean Growers Associations Bean Day. Sprague is a trader with Kelly Bean Co. He is based in Durand, Mich. Here is the text of his speech, along with key slides that accompanied his speech.
Good afternoon. This is the portion of todays agenda where most of the growers and processors are anxiously waiting to get the inside tip on what dry bean is best to plant, when to sell it, and how high the market is going to go. Unlike most of the other market reports with people guessing what will be planted, I hate to inform you that I am not Miss Cleo. I cannot turn over the taro cards and tell any of you which lotto numbers that you should play...
The one sure thing that I have learned in the 29 years that I have been buying and selling beans is that given enough time, the action taken in the market is always the right one. To illustrate a point, I had a neighbor who used to grow navy beans. In the winter of 1974, he sold his 1973 navy bean crop for $50 per cwt. He vowed not to sell his next years production until the market again hit $50. He stored his 1974 navy bean production at home and did not grow another bean crop. This man turned down $38 in 1975 and $34 in 1977 still sticking by his pledge never to sell until the market hit $50. The opportunity to sell at $50 did occur again in 1986. Unfortunately, his 1000 CWT of 1974 navy beans had gone out of condition by then. He was correct in his assessment about the market going back to $50, but he did not have the timeline quite right. I know that no one in this room would ever do such a thing.
There is nothing magical about bean markets but the history of the market has a tendency to repeat over a period of time. The secret, if there is one, is being able to interpret what influences the market. I have been assigned to give a review and preview of the dark red kidney, light red kidney, and great northern markets. If history really does repeat, I thought it best to become a history teacher and present some historical data that might be of help in making wise marketing decisions if you will be producing kidney or great northern beans. This information was gathered from past issues of the Bean Market News and National Agricultural Statistic Service Crop Reports. I have prepared charts on harvested acres, yield per acre, and total production comparing the Northarvest region with the U.S. and the price ranges by year and the mean price with U.S. production by year.
Dark red kidneys
The first chart (chart 1) is of the harvested acres of dark red kidney beans showing the comparison of the Northarvest region with the rest of the U.S. Over the years, I have had countless conversations with growers who feel that because the crop in their area is poor that prices need to increase. They usually do not consider how important their region is to the overall market. The Northarvest region plays the major role in dark red kidney bean production. The two high years of production occurred in 1991 with 76,000 acres and again in 1994 with 81,800 acres. The low was this past year with only 52,700 estimated acres harvested in the U.S. The eleven-year average of harvested acres is right at 65,000 acres.
Next we will look at the average yield by year (chart 2). The significant factor shown is the Northarvest region leads the U.S. average yield. The range in yields in the U.S. was from just below 1300 pounds per acre in 1993 to a high of 1790 pounds in the very next year of 1994. The range of yields in the Northarvest region was from slightly more than 1400 pounds in 1995 to a high of 2000 pounds in 1994. The eleven-year average yield in all regions of the U.S. is 1534 pounds and the Northarvest Region is 1625 pounds.
Next we will look at the total production of dark reds (chart 3). There is a very large range in the production of this class with the production in 1994 at a record high of 1,461,000 CWT and a record low of 2001 production of only 737,000 CWT. The eleven-year average production is 1,003,000 CWT. This is a significant number as it can be closely associated to the average annual consumption number which has been estimated at between 900,000 CWT and 1,000,000 CWT.
The significance of the next slide (chart 4) shows the range in prices of processed dark red kidney beans as reported to the Bean Market News weekly by dry bean companies for all areas where dark reds are grown. These price ranges show the high and low prices dealers reported that occurred sometime during the crop year of September through August from all regions in the U.S. The figures for 2001 are for only the first 3 months of this crop year. This chart does illustrate that choosing when to sell your beans during the year can make a significant difference in overall profitability as most years showed a price range of more than $5.00 per CWT for a processed bean.
The next slide (chart 5) compares the production with the mean price received for processed dark red kidney beans. This is only a mean price and should not be confused with an average price for the year. There is, as expected, a direct correlation between production and the mean price for the year. Years with a production of between 900,000 and 1,000,000 CWT will trade in the upper twenties to low thirties for processed dark reds.
Summarizing the review on dark red kidney beans (chart 6), the average harvested acres in the U.S. is 65,000 acres with an average yield of 1536 pounds per acre for an average production of approximately 1,007,000 CWT. Average annual disappearance is between 900,000 and 1,000,000 CWT. A supply on balance with demand will usually result in processed beans trading in a price range in the upper twenty dollars to low thirty dollars per CWT.
What will 2002 bring? There will be a definite increase in planted acres. How much is a guess. The 43,000 acres that were harvested in 2001 is 22,000 acres less than average. The 1409 pound average yield is 125 pounds below average. This suggests the market will need an increase in harvested acres of about 17,500 acres or about 27% to bring this market back into balance. Supply, however is also being influenced by production from Canada and especially China. China has become our largest competitor for the European dark red kidney market. The price range for processed Chinese dark red kidney beans that had been reported delivered into Europe was from less than $19.00 per CWT to $36.00 per CWT.
Light red kidney
I will begin to discuss the light red market looking at the harvested acres in the U.S. and Northarvest (chart 7). Unlike dark red kidney beans, the Northarvest area is not nearly as important in the light red kidney bean market, normally accounting for from about 10% to 15% of harvested acres. The range of harvested acres is from a low of 59,800 acres in 1991 to a high of 86,900 acres in 1997. The average for harvested acres over the past eleven years is 74,600 acres in the U.S., while the average production in the Northarvest region is 8,400 acres.
The average yield on light reds (chart 8)between the U.S. and the Northarvest region is quite similar with the Northarvest region averaging slightly more than the U.S. average. The U.S. average is at 1621 pounds per acre while that of Northarvest grown beans is 1678 pounds per acre. Many of the light red kidney beans that are grown in the U.S. are produced on irrigated acreage.
The next slide of production (chart 9)shows a higher level than what we saw with dark red kidney beans. The eleven-year average production of light reds in the U.S. is 1,213,000 CWT or about 200,000 CWT more than the dark red kidney bean production. This also suggests an annual usage of about one and one-quarter million CWT. The average production of light red kidney beans from the Northarvest region is about 143,000 CWT. The 2001 U.S. crop was the smallest recorded in our study of only 845,000 CWT.
The price range for processed light red kidney beans (chart 10) is similar to that of dark red kidney beans. The top price of processed light red kidney beans was above $35.00 per CWT five out of the nine years surveyed. Light reds also had a bottom price of $25.00 or below five out of the same nine years. The high reported price for processed light reds was at $41.00 in 1996 and the low was $23.00 in 2000. The high reported price on the 2001 crop is $37.00 through the first quarter of the crop year.
The next slide (chart 11) again shows the mean price in dollars per CWT in comparison to annual production. The high in the mean price occurred in 1996 when production was 1,039,000 CWT. The low in the mean occurred in 2000 with a production of 1,352,000 CWT at $25.50 per CWT. The highest production year of 1997 at 1,618,000 CWT had a mean price of $28.00 per CWT.
In summarizing the light red kidney beans (chart 12), the average harvests in acres in the U.S. for the past eleven years is 74,600 acres with an average yield of 1621 pounds per acre which has produced an average crop of 1,213,000 CWT. The U.S. harvested 63,100 acres of light red kidney beans in 2001 or down 11,500 acres from the eleven-year average. The 2001 average yield was down 280 pounds per acre. This combination resulted in the poorest production in the U.S. over the eleven-years studied of only 845,000 CWT.
The light red kidney bean plantings will be up from last year. The price for light red kidney beans has been higher than most competing dry bean crops in those areas where light reds grow. A good example of this is in the Colorado and Nebraska areas where light red kidney beans compete for acres with pinto and great northern beans. There will also be an increase in planting in parts of Canada that will compete in the export market. Light red kidney bean plantings could still increase about 15,000 acres without putting excessive pressure on prices for 2002.
The last bean class discussed is more recent to the Northarvest region. That is the great northern bean. Most of the great northern beans are produced for the export market and for the domestic packaging market. The Northarvest region has found a small niche in the canned bean segment of that industry and also for a few export sales where color is not the prime factor. The USDA did not consider there were enough great northern beans produced in the Northarvest region to warrant being segregated in the crop reports until 1995. The average harvested acres (chart 13) in the U.S. for the past eleven years are 103,600. The seven-year average in the Northarvest region is only 4,400 acres.
The next slide (chart 14) shows another reason why great northern bean production is not quite so important in the Northar-vest region. The average yield of the Northarvest area lags significantly behind the average yield for the U.S. at 1552 pounds per acre while the US. average is 1934 pounds.
The eleven-year average production of great northern beans (chart 15) is 2,026,000 CWT as compared to the seven-year average of the Northarvest region of only 69,100 CWT. There were three very poor years of production between 1992 and 1994. Comparing the last seven years of production with those recorded in the Northarvest region would yield an average production of 2,273,143 CWT. This says the Northarvest production is only about 3% of the total U.S. production.
The next graph (chart 16) shows a price range from the low twenties to the upper twenties for the past four years for a processed bag of great northern beans. The price range has been reduced from the earlier production years with only a slight increase in U.S. production. Another factor in the lower price range is that other areas such as China and Alberta, Canada have also increased their production of a large white bean. The graph shows very little movement in price for the 2001 crop.
The graph of mean price versus production (chart 17) shows a market that is quite stable. Approximately 80% of the U.S. great northern beans that are harvested are from irrigated production in Nebraska. This area produces a bright colored, shiny bean that is highly desired in the export markets of Europe, the Middle East, and Northern Africa. The mean price is in the low to mid-twenties.
In summary (chart 18), the average harvested U.S. acres over the past seven years are 113,743 acres. The average yield over this same period is 2003 pounds per acre. The average production in the U.S. during the same period is 2,273,143 CWT. The 2001 crop of 97,400 acres averaged 2139 pounds per acre producing 2,088,000 CWT. An increase of about 10,000 acres with a normal yield would bring production up to the average.
There is some question if the great northern bean acreage will change much in 2002, as the great northern bean is currently the cheapest major class of beans in the U.S. This market is very sensitive to the export market as the majority of the U.S. production is exported. China has become the major competitor in this market. There is also an increase in production in areas of Canada such as Alberta. There is hope that more great northern beans could be used by the U.S. Government in providing food for the countries of the Mediterranean Basin as these countries prefer the larger sized white bean characterized by the great northern bean.