American production of field peas and lentils has risen dramatically in response to government support under the Loan Deficiency Payment program. My colleague Kevin Hursh in Saskatoon, SA says back in 2002, the U.S. placed pulse crops under the LDP effectively guaranteeing producers a floor price. A report just released from Agriculture Canada shows the subsequent acreage and production increases.
On lentils, the seeded area in the U.S. has more than doubled since 2001 hitting 450,000 acres last year. Most of the growth has been in North Dakota and Montana. American lentil acreage could increase again this year, even though market prices are badly depressed. Saskatchewan produces far more lentils than the U.S., but it isn’t helpful to have a competitor that has returns guaranteed by a government program.
On peas, the U.S. acreage increase is even more dramatic. In 2001, the U.S. had only 227,000 acres of peas. Last year, the acreage hit 850,000 and this year could surpass 1.1 million.
According to Ag Canada, the Loan Deficiency Payment has sometimes accounted for more than a quarter of the total price received by producers for peas. Market prices for lentils and peas are very low, but when you get an extra dollar or two per bushel from the government, they’re suddenly much more attractive.
That’s how government programs in one country hurt producers in another country. Let’s say for a minute, the Canadian government would provide the same support. We don’t have to imagine very long how that would completely distort the marketplace