At a glance

The pea harvest is over in Ukraine. According to current data, the Y2017 gross pea crop in bunker weight is 44% higher than last year. We believe the Ukrainian pea crop in net weight will reach at least 1050 KMT, i.e. a record last seen in 1995.

This result was achieved primarily due to a pea acreage expansion to a 20-year high. However, a higher average yield contributed to the crop record, too. Although having decreased 17% from last year’s high, the pea yield is now at one of the highest levels for Ukraine.

Growing pea supply in the market undoubtedly pressured prices. Domestic pea prices in Ukraine were down 10-12% year-on-year early in the season (as of August). Nevertheless, they stay at one of the highest levels seen over the last few years. Moreover, domestic pea prices in Ukraine have already exceeded the 2016 level over the last month in view of steady strong demand from traders.

Pea prices in Ukraine move primarily under the impact of fundamental market factors or following the hryvnia exchange rate fluctuation. Contrary to the grain market, pea prices are actually not influenced by the so-called related markets. As a rule, pea prices are scarcely volatile in the first half of the season and then move upward in its latter half because of shrinking supply. Still, it is worth pointing out that this “natural” increase was minimal in the 2016/17 season because demand and supply are well balanced in the market. In our opinion, a similar effect is to be expected in the current season. However, the export market is also a risk factor here, as it is pressured by expanding global pea production.

For now, Ukrainian pea prices in the export market have sagged to a lesser degree over the year than those in the domestic market: by roughly 8-9% to $240-245/MT FOB for November delivery. In view of expanding production, these price developments suggest that pea exports from the country are to further increase.

As a reminder, Ukrainian pea exports set a record this past season of 2016/17. Ukraine exported 486.5 KMT of peas in MY 2016/17, or twice as much as last season (242.5 KMT in MY 2015/16).

The new 2017/18 season will be no exception. According to UkrAgroConsult’s estimates, pea exports from the country may retain their upward trend in the current season and hit another high of some 750-800 KMT.

According to preliminary information, pea exports totaled 248 KMT in July-September 2017, or slightly more than a year ago (219 KMT). In general, the beginning of the new season was unusual because of extremely low exports in July. A later start of harvesting along with a bumper crop shifted the export peak from August to September.

Pea export shipments are expected to decrease in October- January against September due to a surge in corn and wheat exports. However, this drop will not be as substantial as in the previous seasons. The primary reason is this season’s greater export potential, as well as the development of grain handling facilities and export capacities in the Ukrainian ports.

Russian pea market shows a trend similar to that seen in Ukraine. Russian farmers planted 1.34 Ml ha to peas in 2017 that is the largest area since 1995. In the same manner, pea yields in Russia have been rapidly rising over recent years.

Therefore, production in this market segment may hit new highs. According to our estimates, Russia’s pea crop may exceed 2.5 MMT (up 14% from last year’s crop). Simultaneously, a gain in Russian pea exports should be expected as well, because pea consumption in Russia remains relatively stable.

Russia did not realize its pea export potential last season though. Russian exporters supplied 720 KMT of this commodity to foreign markets in the 2016/17 season, i.e. just a bit more than a year earlier (700 KMT was exported in MY 2015/16). At the same time, the country’s estimated export potential was at least 1 MMT. Taking into account growth of the Russian grain market’s potential, peas may get sidelined by other crops.

In addition, Bulgaria almost doubled its pea plantings. They are now at 30 Th ha that is also the largest area since 1991. Kazakhstan expanded its pulse acreage by 17% in 2017. So, pulses, including peas, become increasingly important in the Black Sea countries.