Pulse market watch

Market Focus

Highlights

  • Large crops, fumigation issues and new import duties threaten pulse trade with India
  • Food issues draw hyper-sensitivity in India politics
  • Ground rules for trade need to be clearly established

There is still uncertainty regarding the immediate pulse market outlook, in particular what will happen next with Indian pulse demand. A record large pulse crop is about to start harvest over there. As a result, buyers were already a little hesitant to contract further pulse business for export to India. That issue is compounded by a looming March 31 deadline on shifting methyl bromide fumigation to export origin, rather than at discharge port in India.

Import duties

And now this week, the Indian government announced that effective immediately an import duty of 10 per cent will be applied on tur (pigeon peas) and lentils.

No change has yet been made to include import duties for chickpeas, field peas or other classes of dry edible beans. Those remain at zero for now. However, the change underscores the willingness of the Indian government to discourage pulse imports on the belief this will provide price support to their farmers.

There have been rumours this week that the Indian government has or is very close to extending the fumigation rule for another three or six months.

That said, there is pressure within the government to raise import duties to 10 per cent for chickpeas and 20 per cent for field peas.

Bumper Crop

India is anticipating a bumper crop of pulses this year – as much as 22.14 million tonnes compared to 16.4 million tonnes last year. Add in a rapid pace to pulse imports since last summer (six metric million tonnes) suggests aggregate availability of pulses in India (domestic production plus imports) at a massive 28 million tonnes this year.

The impact of a big rebound in supply, not surprisingly, has been a collapse in the price of major pulses, such as pigeon pea (tur/arhar) and chickpea (chana which our yellow edible peas compete against) in recent months. Growers over there are upset after being encouraged by their government last year to ramp up pulse acreage at the expense of other crops only to see production shoot up and prices subsequently break down.

So there is politics associated with these fumigation and import duty issues constrain import flow in order to force the use of domestic production, and hopefully, in turn move price back up to levels more acceptable to Indian growers.

Pulse Canada CEO Gordon Bacon said the proposal from Canada that India is now considering has less to do with whether fumigation of pulse cargos should be done prior to export or afterward, and more to do with whether shipments from Canada carry any appreciable risk of pests that may spread and cause harm to the Indian agricultural industry.

“We’re beyond saying there’s a need to fumigate, whether in Canada or in India, because there is no risk,” he said.

There have been rumours this week that the Indian government has or is very close to extending the fumigation rule for another three or six months. Not really sure that would change anything from our point of view as an exporter looking to contract new business; it just provides an opportunity to finish up old business on the books.

Food issues

Food issues draw hyper-sensitivity in India politics. Following two consecutive years of drought which severely curtailed Indian crop production and drove pulse prices to their recent highs, a return of monsoon rains last summer set the stage for a revival in crop production, exacerbated by an Indian government which pressed a campaign to entice Indian farmers to boost pulse and oilseed acres.

Longer term though, pulse price prospects may brighten. Indian growers who shifted heavily into pulses this growing cycle are feeling distraught by poor market results and are already vowing to shift acres back to other crops such as wheat and sugarcane.

But one thing needs to happen – establish the ground rules of trade, then price discovery can go about its business.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 
204-654-4290 or visit www.pfcanada.com to find out more about his services.

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