2006-02-24 | Volume 19 Number 4 | ISSN 1494-1805 | AAFC No. 2081/E

United States: Pulse Crops Situation and Outlook

During the past ten years, seeded area for dry peas and lentils in the United States (US) was relatively stable until 2002 when these crops, as well as chickpeas, were first included under the loan program. Since 2002, the seeded area increased sharply for both crops. In contrast, US seeded area for dry beans, which are not included in the loan program, has been trending downwards. Although there is bilateral trade in pulse crops, the US and Canada are competitors in world markets, especially for dry beans, dry peas and lentils. This issue of the Bi-weekly Bulletin examines the situation and outlook for the production and trade of pulse crops in the US.

Production

The US is a large producer of dry beans, dry peas and lentils, a small producer of chickpeas and a minor producer of fababeans. In 2005, the US accounted for about 6% each of world dry bean, dry pea and lentil production. During the past ten years, total pulse crops seeded area has been cyclical, but with no significant upward or downward trend. However, in the latest cycle, seeded area rose in 2004 and rose further to a ten year high in 2005.

Dry Beans

Dry beans are the largest pulse crop produced in the US, although the seeded area and production have been trending downwards during the past ten years. Pinto, white pea (navy) and black are the largest classes of dry beans produced in the US. Other classes produced include Great Northern, light and dark red kidney, small red, pink, cranberry, small white, blackeye, large lima and baby lima. Seeded area and production have been trending downwards over the past ten years for white pea, Great Northern and cranberry beans because of competition in the export markets, but remained relatively stable for pinto, light and dark red kidney, small red and pink beans. North Dakota is the largest producing state, accounting for 37% of the US dry bean seeded area in 2005. The other major producing states are Michigan, Nebraska, Minnesota, Colorado and Idaho.

Dry Peas

US dry pea seeded area and production have increased sharply since dry peas were first included under the loan program in 2002. The seeded area nearly quadrupled since 2001, with most of the growth occurring in North Dakota and Montana, with North Dakota accounting for 67% of the US seeded area in 2005. Other important dry pea producing states are Washington and Idaho. The US produces mainly green peas, but yellow, Austrian winter and wrinkled seed peas are also produced. The growth in production has been mainly for green and yellow peas.

Lentils

US lentil seeded area and production have also increased sharply since lentils were first included under the loan program in 2002, but the increases haven been as large as for dry peas. The seeded area has more than doubled since 2001, with the growth occurring in Montana and North Dakota, with each state accounting for about a third of the US seeded area in 2005. Other important producing states are Washington and Idaho. The US produces mostly medium green and brown lentils, but some large and small green, and red lentils are also produced. The growth in production has been mainly for the medium green type.

Chickpeas (Garbanzo beans)

US chickpea seeded area and production has been cyclical during the past ten years, peaking in 2001, followed by a sharp decline before recovering in 2005. The US produces mainly large kabuli chickpeas. Although production of small chickpeas, (small kabuli and desi), is low, there has been growth since they were first included under the loan program in 2002. In 2005, Idaho and Washington accounted for about a third and a quarter, respectively, of the US seeded area. Other significant producing states are California, Montana, North Dakota and South Dakota.

Trade

Dry beans and chickpeas produced in the US are mostly used domestically and only about one-third are exported. In contrast, more than half of the lentils and about half of the dry peas produced in the US are exported.

The US is a net exporter of dry peas, dry beans and lentils, but the long term balance of trade for chickpeas and fababeans has been about equal. In terms of world trade, the US accounts for about 10% of world dry bean, dry pea and lentil exports. US share of world chickpea and fababean exports is very small. The US is a fairly small importer except for dry beans, for which it accounts for about 5% of world imports. With the growth in production, the US has become a much more significant competitor for Canada and other exporting countries in the world dry pea and lentil markets.

A significant portion of US pulse crops are exported through food aid programs. Averaged over the past five years, food aid exports accounted for 71%, 46% and 19% of total lentil, dry pea and dry bean exports, respectively.

Dry Peas

US dry pea exports, generally destined for the food market, have been trending upwards with the increase in production. Imports, most of which come from Canada, have been relatively stable. Exports to Canada have been rising as some producers near the Canadian border deliver to Canadian dealers. For the first time, in 2005 the US became a net exporter of dry peas to Canada. US dry peas are exported mostly to Africa, Asia and the Americas. Canada is the largest export destination. In 2004, Cuba became the second largest destination. In 2005, India became a major export destination, ranking third. Other major markets are Philippines, Sudan and Kenya.

Dry Beans

US dry bean exports have been trending downwards, while imports have been trending upwards. US dry beans are exported throughout the world, with United Kingdom, Mexico and Canada the most significant destinations. Imports are mostly from Canada. Exports to Canada have been variable, while imports from Canada have been trending upwards. There is significant cross border trade by producers because many US and Canadian growing areas are located near the border.

Lentils

US lentil exports have been trending upwards with the increase in production. Imports, mostly from Canada, have been low and variable. US lentil exports are mostly to Europe, Africa and the Americas, with Spain being the largest importer. US lentil trade with Canada has been relatively small.

Chickpeas

US chickpea exports have been variable and in line with production volumes. Canada and Spain were the largest destinations. Imports have been relatively stable, with Mexico and Canada as the main suppliers.

Fababeans

US fababean trade is small and mostly with Canada.

Outlook 2006-2010

For 2006, US production of dry peas, lentils and chickpeas is expected to increase from 2005 due to higher seeded area, resulting from higher expected net returns relative to many alternative crops. For dry peas, lentils and small chickpeas, the higher net returns are due largely to the high loan deficiency payments or market loan gains received for these crops. For large chickpeas, the higher net returns are due to historically high prices. Production of dry beans is forecast to decrease because of a return to normal abandonment, which is higher than in 2005, and lower trend yields. However, supply is expected to be similar to 2005-2006 due to higher carry-in stocks. The US share of world production is forecast to increase to about 8% for dry peas and 7% for lentils, but remain at about 6% for dry beans. Higher production is expected to result in increased exports of dry peas, lentils and chickpeas in 2006, while dry bean exports are expected to remain stable.

For 2007, the seeded area for dry peas, lentils and small chickpeas is expected to increase further although the rate of growth will depend on expected net returns compared to alternative crops.

For later years, the seeded area will depend on the support programs available at that time, as well as expected net returns relative to alternative crops. However, dry peas, lentils and, to a lesser extent, small chickpeas are becoming established crops as producers become experienced in growing them. They are also produced over a larger geographic area than before 2002, when these crops were first included under the loan program. Therefore, even if the area should drop, it would still be significantly higher than it was prior to 2002. The seeded area for dry beans and large chickpeas is expected to continue to be variable and depend on expected net returns relative to other crops, unless they are included in a future support program.

US per capita dry bean consumption has been trending downwards during the past ten years, ranging from a high of 7.8 pounds (lb), {3.55 kilograms (kg)} in 1999 to a low of 5.7 lb (2.59 kg) in 2004, but recovered to 6.0 lb (2.72 kg) in 2005. However, there are industry wide programs underway to promote dry beans, as well as other pulse crops, as healthy foods. These programs are expected to reverse the decline in per capita consumption and, when combined with population growth, food use of dry beans and other pulse crops is expected to increase. There are also efforts underway to promote dry peas as an ingredient in livestock rations. At the present time, the use of dry peas for livestock feed is at an early stage of development. Therefore, there is a large growth potential. US exports of pulse crops will depend on the level of production and domestic use, but the US is expected to continue to be a significant player in world dry bean, dry pea and lentil trade. Imports will also depend on domestic production, but the volumes are not expected to change significantly.

US Farm Security and Rural Investment Act of 2002 (FSRIA)

Under the FSRIA, dry peas, lentils and small chickpeas were, for the first time, included under the loan program. The loan rate provides a floor return because if the posted price is lower than the loan rate, the producer is eligible for a loan deficiency payment (LDP), or alternatively the producer can obtain a loan at the loan rate for up to nine months. If the price is lower than the loan rate, the producer can repay the loan at the lower price and keep the difference. The difference is called the marketing loan gain (MLG). However, most producers have chosen to take the LDP rather than taking the loan.

The FSRIA is scheduled to end with the 2007 crop year. However, the industry is lobbying for program continuation in the 2007 farm program legislation, which would start with the 2008 crop.

For the 2002 crop, the loan rate and the posted prices used to calculate the LDPs and MLGs were based on No.1 grade, with discounts for lower grades. In 2003, the base grades used for the posted prices were lowered to feed grade for dry peas and No.3 grade for lentils and small chickpeas. This change made it easier for dry peas, lentils and small chickpeas to qualify for LDPs and MLGs since the loan rates were not reduced and prices for the lower grades are lower than for No.1 grade. It also increased the level of LDPs and MLGs for these crops. Also in 2003, two regions for dry pea loan rates and posted prices were established to better reflect the prices received by producers; West Region (Arizona, California, Idaho, Nevada, New Mexico, Oregon, Utah and Washington) and the East Region (all other states, including Montana and North Dakota). For 2006, lentil loan rates and posted prices were set by West and East region for the first time. The loan rates and posted prices in the West Region are higher than in the East Region, but since they are both proportionally higher the LDPs and MLGs are the same in both regions. For crop years 2004-2007, the national loan rates fell slightly for all three crops.

For the 2002 crop, LDP/MLGs were only paid for lentils. With the base grade changes in 2003, LDP/MLGs were paid for dry peas and small chickpeas, but the price of lentils rose sharply and they were not eligible for payments. For the 2004 crop, dry peas and small chickpeas were eligible for payments throughout the year, while lentils became eligible late in the crop year. For the 2005 crop to date, dry peas, lentils and chickpeas were all eligible for payments. LDPs and MLGs account for a significant portion of the total price received by producers for the sale of the eligible crops, especially for dry peas. For example for the 2004 crop, LDPs and MLGs accounted for more than a quarter of the total price received by producers for dry peas.

Dry peas, lentils and small chickpeas are not eligible for direct payments or counter-cyclical support under FSRIA. However, these are based on historical seeded area and yields and are theoretically decoupled from production during the year of the payout.

by Stan Skrypetz, Pulse and Special Crops Analyst

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While the Market Analysis Division assumes responsibility for all information contained in this bulletin, we wish to gratefully acknowledge input from the following: United States Department of Agriculture, Market and Industry Services Branch (AAFC)