Tricky trade situation with India averted for now

Market Focus

Highlights

  • India’s deadline for port of departure fumigation requirements of ag commodity shipments extended to June 30
  • Canadian officials will continue pressing for a longer term solution with pulse trade into India
  • Canadian shippers need further clarification of India’s declaration of a new 10 per cent import duty on shipments of wheat and pigeon peas

Just ahead of its March 31 deadline, India’s Ministry of Agriculture renewed the fumigation waver that will allow Canada-India trade in pulses to proceed.

The announcement states that consignments of all imported agricultural commodities, whose bill of lading date in the “country of export” on June 30 or before, and for which treatment of methyl bromide fumigation is stipulated in plant quarantine, will be allowed without offshore methyl bromide fumigation from those countries which certify discontinuance of this chemical for phytosanitary measure.

In plain English, the March 31 deadline rule based on port-arrival has now been extended to June 30, with reference changed to port departure. This is about a four month-long extension to movement of Canadian pulse crops to India.

While not a permanent solution to a tricky trade situation with India, the announcement does at least eliminate some uncertainty.

Tidy-up old crop

While not a permanent solution to a tricky trade situation with India, the announcement does at least eliminate some uncertainty, at least enough so to enable pulse merchandisers to tidy-up old crop shipping commitments if not having done so already. Perhaps there's also the opportunity to tackle additional export business should the arbitrage math work.

Still, Canadian shippers need further clarification of India’s declaration of a new 10 per cent import duty on shipments of wheat and pigeon peas. Will such a duty application also follow for imports of chickpeas, field peas and lentils?

Longer term solution

Canadian officials will continue pressing for a longer term solution with pulse trade into India, and one that in the future avoids the need for these last minute extensions and complications. That said, it would seem unlikely that India will relinquish its ability to employ arbitrary policy changes when viewed in their best interests to do so.

Elevated trade risk

A government that is prone to arbitrarily micro-manage trade for political reasons can elevate trade risk, which in turn is reflected in a higher cost of doing business. Also, more trade is apt to be done last minute rather than forward contracting six months or more outwards given the new business uncertainties.

Farmers have to adjust to that reality in the pulse trade with India because it is radically different than being able to sell volumes of canola six to nine months forward to Japan.

India needs exporter supplies just as much as Canada needs to maintain key export markets for its pulses. Trade will happen, perception will swirl and life goes on, but we must keep in mind that the political environment is now more unpredictable.

I suspect we will be pressing right up to this new June 30 fumigation deadline, looking for another 11th hour resolution. In the meantime though, it leaves new crop shipping slots with inflated political uncertainty.

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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