Analysis of the 2016 Pea Market Situation and 2017 Outlook

In order to understand the current market situation of peas in China in 2016 and to make a correct forecast of the situation in 2017, starting from November 1, 2016, the research team conducted interviews and telephone surveys with growers, intermediary traders, downstream processing enterprises and other practitioner groups, taking nearly 2 months in total, with more than 100 survey samples from different groups.

2016 Pea Market Situation and 2017 Outlook

Dry peas are mainly distributed in the central and northwestern regions, with the main producing areas being Gansu, Qinghai, Ningxia and several other provinces and regions. In 2016, the area was 1.46 million mu, down 1.25% from the previous year, and the output was 210,000 tons, a decrease of 4.65%. Because pea returns are relatively low, farmers' enthusiasm for planting is not high, and the planting area has declined year by year. It is expected that the pea planting area will continue to decrease in 2017.

I. Market Operation Characteristics in 2016

China's total annual pea supply consists of two parts, namely domestic production and imports. In the past two years, affected by imported peas, overall trading of domestic peas has not been brisk, and pea processing manufacturers mostly use imported peas, causing the area of domestic peas to continuously decline and output to keep falling.

Both planting scale and output have declined somewhat

In the past three years, China's pea planting area has declined year by year. In 2016, the area was 1.46 million mu, down 1.25% from the previous year, and the output was 210,000 tons, a decrease of 4.65%. Because pea returns are relatively low, farmers' enthusiasm for planting is not high, and the planting area has declined year by year.

Gansu, Ningxia and Qinghai are China's three major pea-producing areas. In 2016, Gansu Province's planting area was 290,000 mu, an increase of 16.27%, total output was 41,000 tons, a year-on-year increase of 10.81%, and yield per unit area was 280 jin/mu, a year-on-year decrease of 3.45%. Qinghai Province's planting area was 230,000 mu, a decrease of 12.36%. Output was 35,000 tons, a year-on-year decrease of 20.45%, and yield per unit area was 300 jin/mu, a decrease of 9.09%. In Ningxia, the planting area fell to 340,000 mu, a decrease of 9.16%, output was 47,000 tons, a year-on-year decrease of 17.54%, and yield per unit area was 280 jin/mu, a year-on-year decrease of 9.68%.

High dependence on imports

Because pea prices in the United States and Canada are low, China's pea imports have continued to increase. In the past three years, China's pea imports have increased year by year. From January to October 2016, pea imports were 807,000 tons, and full-year imports are expected to reach 920,000 tons, indicating relatively high dependence on foreign sources. China is the world's largest importer of peas, with its import value accounting for 24.81% of the world's total pea import value, followed by Pakistan and Italy. From January to October 2016, pea exports were 912 tons, with limited impact on the domestic market.

Deep processing exports account for a large proportion, while domestic sales are limited

Fresh peas are generally divided into filled pods, unfilled pods, and pea grains. Industrial demand is for dry peas, which are processed into pea starch and then made into vermicelli and noodles to replace mung beans in making vermicelli. In addition, peas can be made into flour for noodles, but the taste is average. Of domestically produced pea protein, 80%-90% is exported to the United States, Europe, Japan and other countries with relatively high requirements for food and health products. About 10% of pea protein is sold domestically, with users being additive production enterprises for nutritional and health-care drugs.

Yield per unit area declined, and planting returns declined somewhat

Peas are mainly planted in China's central and western regions. In normal years, yield per unit area is 300 jin/mu, while this year the average yield per mu was only 280 jin/mu. Gansu pea varieties include mottled peas, green peas and white peas. Because white pea prices are low, the planting area has gradually decreased in the past two years, and returns have likewise been declining. In 2016, due to the decline in output, Gansu Province's planting returns were 378 yuan/mu, a year-on-year decrease of 1.05%. In Ningxia, planting returns in 2016 were 344 yuan/mu, a year-on-year decline of 16.8%.

II. 2017 Industry Outlook and Policy Recommendations

(1) Production outlook: planting intention for green peas is still acceptable, while planting intention for dry peas is weak

In the past two years, under the impact of imported peas, demand for domestic peas has declined year by year. In western producing areas, because potato output is relatively high and corresponding subsidies are available, some farmers have switched to planting potatoes, farmers' enthusiasm for planting has declined year by year, and some farmers have chosen to plant corn, lentils and broad beans. Under normal circumstances, the output and price of dry peas are far lower than those of green peas. If compared with the returns from fresh green peas, the returns from dry peas are only 30%-40% of those from green peas. From the perspective of income, farmers are not keen on planting peas. In some areas, there is intention to plant green peas, especially in some regions with relatively large vegetable-producing provinces, and the proportion of fresh consumption has risen slightly in recent years. Early market listing through plastic film mulching is a main way for some pea growers to increase income. Because pea prices are not stable, most farmers plant peas to fill in when other crops delay the farming season or simply to avoid leaving land idle. If peas are planted alone, for the northeastern region, no other crops can be planted during the year, and the economic benefits of peas are very low, making it uneconomical. However, Shandong, Jiangsu and other places can continue to plant other crops in the same year after the pea harvest is completed. In addition, in some areas where wheat cannot be planted, vegetables can be considered for rotation without delaying the cropping schedule.

(2) Consumption outlook: the number of deep-processing enterprises is limited, and downstream demand is relatively weak

Domestic deep processing of peas is mostly near Shandong, while peas are mostly planted in the northwestern region. In addition, freight costs are relatively high, resulting in low enthusiasm among downstream processing plants for purchasing domestic peas. In the past two years, overall demand in the starch industry has shown a slight downward trend, and the main downstream demand for pea starch is vermicelli and noodle processing. In recent years, due to factors such as substitution by cassava starch, environmental protection, and the market environment, the profitability of deep-processing manufacturers has been average, demand for pea deep processing has decreased, and overall demand across the industrial chain has been relatively weak.

(3) Price outlook: under the impact of imports, domestic peas are unlikely to have room to rise

Planting costs in Canada and the United States are low, and the planting area may continue to increase in 2017. It is expected that imports in 2017 will still be in a slight upward channel, which will still bring some bearish pressure to the domestic pea market. Weather conditions in 2017 are still not viewed favorably, and the quality of domestic peas will still decline. In recent years, pea returns have been relatively low, farmers' enthusiasm for planting is not high, some farmers choose to plant broad beans to replace peas, demand for peas will still decrease, and domestic pea prices are unlikely to rise.

Policy recommendation: build deep-processing enterprises in producing areas to reduce logistics and transportation costs

Establish new vegetable preservation warehouses and warehousing and circulation links for newly built agricultural product processing enterprises. In this way, pea quality and output can be guaranteed to a certain extent. It is recommended to establish deep-processing production bases in producing areas to meet enterprises' raw material procurement needs. Pea circulation channels are limited, trade channels are not broad, and varieties differ, so enterprise procurement is limited. It is very difficult for eastern enterprises to purchase raw materials, and circulation between producing areas and sales areas is not smooth. Some enterprises would rather purchase imported beans to meet production needs.

III. Risk Warnings

Weather factors are changeable, and fresh-food storage requires caution. In terms of production, pea output is low and farmers' income is small, making it difficult to greatly increase the planting area. Domestic deep-processing enterprises should reasonably arrange production plans to avoid risks brought by fluctuations in raw material supply. Weather factors in 2017 are uncertain, and pea planting as well as the storage and transportation of fresh peas will still face certain risks.