For the 2008 North American dry bean crop a number of private forecasters are already penciling in a drop of 6% in total (all market classes) seeded acres. This is but a continuation of a long-term trend of declining net bean acres throughout North America. Should yields drop below trend line, production would collapse.
Under such a scenario available supplies and pipeline stocks would range from moderately to extremely tight. Carry-over stocks under one scenario would be negative in all but two market classes – Pinto and Black beans, even though both these types are expected to experience fairly large drops in seeded area.
Large downward shifts in acreage are expected in North America’s premier growing region the Red River valley which includes the states of North Dakota, Minnesota. Reductions may extend into southern Manitoba. Forecasted drops for certain market classes range as high as 27%.
Such declines in acreage, if realized will certainly bring supply challenges. Should yields not hold trend then severe shortages of some if not most market classes of dry beans could well develop.
In order to maintain sufficient ‘base’ acres, prices (of all market classes of beans) offered to producers may well have to rise above present levels. This only to make beans look better competitively priced with the traditional mainline crops of soybeans, wheat and corn.
Should futures and cash markets for wheat, corn and soybeans remain at current levels through the winter, and dry bean prices not respond, most classes of dry edible beans may be unable to compete for acres in the spring. This would be true on an absolute cash basis and as noted from some US quarters that for many US producers dry beans lag in returns basis insurable acreage revenue.
The gross per acre revenue spreads between wheat, soybeans and corn to dry edible beans has been narrowing in recent years. Stated another way gross per acre revenue ‘premiums’ generated by dry beans is eroding versus the traditional crops. These premiums may have narrowed to a point where dry beans, as priced today, no longer offer a sufficiently attractive incentive to return to risk and time.
In order to maintain North American seeded area at current levels, grower prices for dry beans as a class may need to rise.
One analysis suggests the price for ‘the bean’ historically on the lowest pricing rung needs to be closer to $31.00/cwt. (100 lb. bag). While those beans historically in a higher priced market class may need to see their value exceed $36.00/cwt. (100lb. bag)
Initial reports for Ontario suggest these pricing levels are available and “grower uptake” is good.
However the US market is the driver for dry bean prices. In order to reverse the long-term downward trend in edible bean acres the market may need to see a sustained significant price increase which at the moment does not appear to be the case.