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Pulses to pintos: A state of the bean market

January 14, 2019 GMT

GERING — Jon Sperl, merchandiser for New Alliance, gave producers his outlook on the year ahead for peas and beans Thursday, at WESTCO’s annual producers meeting at the Gering Civic Center.

Sperl said the fragility of the marketplace is tied to production, politics and purchase choices.

In a lesson learned from 2018, Sperl said producers rushed to produce more garbanzo beans — a staple for vegans and hummus-loving millenials. Farmers swung more acres of production to garbanzos because the market looked exciting. But that rush quickly created a situation where producers “became their own worst enemy,” Sperl said. Producers put 300,000 fewer acres into production for pulses — peas and lentils primarily — and overproduced acres of garbanzo beans, with hopes of capitalizing on a growing trend.

“Unfortunately, the market (for garbanzos) went from $45, to this week, where they are trading at $0.14,” he said. “There are some tariffs in there, but you can see how quickly producers can oversupply the market in what I would call a specialty or niche market.”

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The pulse for cheap protein

“People around the world don’t have the financial means we do, so cheap protein is a big deal,” Sperl said.

For example, India — the world’ largest consumer of pulses — also grows 52 percent of the pulses produced in the world. Additionally, the subcontinent takes in about 50 percent of U.S. pulse exports, and about 80 percent of Canadian exports. However, India and China — the second largest global consumer of pulses — have been largely out of reach to U.S. growers for much of 2018 due to tariffs, Sperl said.

Sperl said the good news is that New Alliance coordinated the last few deliveries of beans to the Bridgeport facility after harvest in order to start splitting peas as quickly as possible. With the pea splitters running, more of those split peas have been put toward PL 480, an international food aid program established through the Agricultural Trade Development Assistance Act. This aid is typically destined for Africa, and 58 kilogram bags are shipped to meet those needs. Some of the production is also going to Section 32 — which purchases high-quality food each year to support the following USDA nutrition programs like the National School Lunch Program.

And the pet food industry has also taken an increased interest in pulse proteins.

“The perception is that pulses are healthier, so the pet food industry has become a big player in the pulse market,” he said.

2018: The year of the tariffs

Tariffs globally have cost hundreds of millions of dollars worth of inefficiencies in the marketplace, Sperl said, with farmers bearing the brunt of that loss in value.

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Sperl said he came on staff at New Alliance in Nov. 1, 2017, and by Nov. 21, India put tariffs in place overnight — 50 percent on peas, 66 percent on garbanzos and 33 percent on lentils. On top of this, exports of U.S. origin faced an additional 10 percent in retaliatory tariffs resulting from President Donald Trump’s tariffs on steel and aluminum. Initially, the Indian tariffs were political in nature, Sperl said. Indian farmers experienced record production with four crops over two years, creating considerable excess that drove domestic prices down. The tariffs were supposed to be a temporary means to protect Indian farmers, coinciding with the election cycle that year. However, the tariffs have since been extended four times, with each extension lasting three months.

“The good news is that (India) is a little drier this year and their acres are down,” Sperl said, adding that Canadian exporters believe the Indian market will reopen to pulse imports on March 31, when the last round of the tariff extension sunsets. And because India cannot grow enough to meet their own needs without North American production, they will need to reopen the markets.

“It’s not a matter of if they will be back, but a matter of when,” Sperl said.

“Mom is always right”

In recent years, producers switched to slow-darkening pinto beans because they look better in the bag at the supermarket. However, when refried, slow-darkening pintos tend to have the color consistency of mashed potatoes or sour cream.

“The consumer wanted them, but when mom refries the beans for the kids and they don’t look right, and all of the sudden she’s kicking that product back up the chain,” Sperl said. “We need to be aware of that because moms are always right.”

If the ultimate consumer doesn’t like the product, producers need to respond, Sperl said. This is true for non-GMO and organic products popular in supermarkets, especially in urban areas.

“You spend time in Denver or San Diego, it’s what the consumer wants,” he said. “It is what the consumer wants, and they’re willing to pay what they consider a premium.”

Pintos

North Dakota are the kingpins of the pinto market, leaving Nebraska at the tail of production. Sperl said North Dakota growers fire sale their pinto beans, with the average price being more than $22 in 2018. With the cost of processing splits and cleanouts at 10 percent, or more than $2, North Dakota producers are selling processed pinto beans out the door for $25.

“There is no market in that,” Sperl said. “But if there’s any good news, they jumped in to the slow-darkening market and they don’t grow as good of beans as we do here in Nebraska.”

Sperl said he hopes more North Dakota growers will get out of beans to help improve the prices.

Market gateways for pintos are Florida (with access to the Caribbean), California and Texas. With ease of rail traffic south from Nebraska, Sperl said he has seen success in picking up accounts in Texas.

In late October, Hurricane Willa made landfall on the west coast of Mexico, which damaged the bean crop in Mexico’s Sinaloa state, along with severe frosts in December that could prove to be a win for Box Butte and Scotts Bluff counties.

While Mexico has had similar luck as the U.S. with record bean harvests, the downturn in this year’s harvest could lead to more demand for U.S. pintos.

Great Northerns

European buyers like a white bean, and since 80 percent of the world’s Great Northerns are grown here in the Panhandle, it has proved a popular, lucrative crop.

However, with the European tariffs on U.S. imports, Sperl is nervous that Canadian growers may switch to growing Great Northerns.

U.S. consumption continues to increase, but for foreign food aid programs, Sperl said that Section 32, PL 480 and world food programs are way behind in meeting their needs volume-wise.

Thankfully, 207,000 bags of Great Northerns were recently sold and shipped as part of the World Food Aid relief to Yemen, a Middle Eastern country whose people are starving as a result of civil war.

And because of that, the prices for Great Northerns have gone up from $2 to $3.

“When you consider that the market of Great Northerns is a little over 1 million bags, and 207,000 were in one sale, it’s pretty exciting for the future,” Sperl said.

And as the European markets work off their current stores, Sperl said he hopes the tariff situation will be rectified so Great Northerns can again meet pent-up European demand.

Other markets that New Alliance has found since the trade spat began include Colombia, Chile and Costa Rica.

“It’s interesting to see that we are competing with the alubia, a white bean from South America, and Argentina produces a lot of them,” Sperl said. “We’ve been able to ship all the way to Chile and compete with that bean. They love what you guys are producing.”

What if?

Corn is king and soybeans are queen. Even if the tariffs go away overnight, it will take a while for international markets to pick up again, finding ways to ship those beans and peas will be a concern.

“One of the things I hope you hear from this is the urgency of making these market decisions,” Sperl said.