What’s Up With Peas?

There’s been a lot of hand-wringing in the pulse industry about India’s proposed changes to its fumigation regulations. For those who haven’t been watching the news, India has announced that as of March 31, they will start enforcing long-standing regulations that pulses (and other crops) need to be fumigated before they enter the country. Whether or not Canadian crops actually need to be fumigated is apparently beside the point.

For several years now, the Indian government had delayed implementing the regulations and allowed pulses to be fumigated at Indian ports, because imports were needed so badly. That’s changed now, at least for the time being. The big Indian rabi crop has taken away the immediate concern about low supplies and the government is now threatening to reapply those regulations. There are still hopes the issue can be resolved and the outcome is unclear. But for now, pulse trade into India has mostly stopped.

Through all the uproar over this issue, bids for yellow and green peas in western Canada have been largely unchanged. That’s a bit of a surprise, given that the industry is so heavily focused on India as a key buyer. True, a few Canadian buyers have pulled their posted bids and some other bids are lower, but pea prices are performing far better than lentils during this time of uncertainty.

So what gives? There are a couple of reasons why peas haven’t been hit too hard. For one thing, China has emerged as a larger buyer in the past few months, meaning Canada is less dependent on India as the main source of demand. In January, China imported 149,000 tonnes of peas, the highest monthly total since June 2013.

Since then, a lot of Canadian peas have been moving through the elevator system, with farmers delivering about 80,000 tonnes per week recently. Most of those peas are headed to the west coast, not all to China, but the solid movement shows there’s still good off-shore demand. In fact, shipments of peas out of country elevators in the past three weeks have actually surged to the highest levels since early October, continuing the string of above average shipments. This latest pick-up in shipments is a clear signal that exports certainly haven’t disappeared.

Even if India decides to apply its fumigation regulations, it doesn’t mean the door is slammed shut on Canadian pea exports. One possible solution is that cargoes of peas are fumigated at another port enroute to India. That’s an easier process for peas in bulk vessels than in containers. And we’ve heard the cost of fumigating elsewhere isn’t prohibitive.

It also helps that Indian prices for peas have avoided the sharp declines seen in other pulses as the rabi harvest is underway. This relative price strength, even when large volumes of peas have been imported by India, is a positive signal that overall consumption is growing in the country. Current prices in Mumbai are still high enough that Canadian peas could still be trading into India, even with the slightly higher costs of fumigating at third-party ports.

All year long, I’ve been fairly negative on prospects for pea prices and have been proven wrong. The underlying strength in spite of the record Canadian export pace tells us the overall demand base is growing. While I still don’t expect a serious rally in pea prices over the next few months, it doesn’t look like we’re going to experience a crash either. Sometimes it’s not so bad to be wrong.

Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.