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Pulse Market Insight #157 OCT 23 2017 | Producers | Pulse Market Insights

Latest Developments in India Causing Uncertainty

The question I hear most frequently when discussing pulse markets is, “What’s going on in India?” And for good reason; India is still the dominant global buyer of peas and lentils and demand there can make or break the market. In this article, I’ll look at some Indian developments influencing pulse markets in 2017/18 and point out what to watch for in the coming months.

Probably the most unpredictable thing in the Indian market isn’t the weather, but rather policy changes by its government. Whether it’s trade restrictions, interference in market structure, import or export tariffs, shutting down futures trade or adjusting minimum support prices, there’s no end to actions the Indian government has used to either benefit farmers or consumers. And it seems each action ends up causing some unintended consequences that then have to be fixed with yet another intervention, and on it goes.

The Canadian industry is still waiting for more clarity from the Indian government about fumigation requirements for imported pulses. For now, imports of Canadian pulses don’t need to be fumigated before they get to Indian ports but an inspection fee is in place which adds a cost, which ends up being passed all the way back to farmers.

Those fumigation issues won’t stop the trade but does add costs. Much more concerning is the precedent that the Indian government took with moong and urad beans, two pulses that Canada doesn’t trade. In August, the government essentially slammed the door on those imports with no warning because it decided domestic supplies were high enough and wanted to support prices. Although the odds of it happening to peas and lentils are low, it remains a possibility.

While all this is happening, Indian farmers have been growing the summer (kharif) pulse crop. Most kharif pulses don’t affect Canadian crops except pigeon peas (tur), since Canadian split green lentils are sometimes used as a substitute for tur. In 2017, Indian farmers planted 18% less tur than the year before and there have been some concerns about low monsoon rains in north-central India. This year’s tur crop will certainly end up smaller than the year before which could mean a little more demand for Canadian green lentils later in 2017/18.

More important is the outlook for the 2017/18 Indian winter (rabi) growing season, when chickpeas, lentils and peas are grown. That planting is just about to get underway and a good start depends on soil moisture from the earlier monsoon season. The rainfall map shows precipitation through that monsoon season was decent for much of the country but in the important north-central region, rain was deficient. This raises some (very early) concerns about rabi crop potential.

The other factor that could influence the rabi crop size is how farmers respond to low pulse prices. While prices for desi chickpeas, India’s largest pulse crop, are still above the previous lows, both red lentils and yellow pea prices are the lowest they’ve been in years and that could discourage acreage.

Keep in mind, the rabi crop hasn’t even been planted yet, so it’s difficult to make any firm projections about crop potential. But there could be some longer-term support for pulse prices. Upside potential though, will be capped by comfortable domestic supplies that would cushion a possible crop shortfall.