Serious Damage for the Pea Market

For the last few months, our focus in the pea outlook had mostly been on India and what it might do as the February 28 tariff deadline approached. It turns out this wasn’t the biggest issue for the pea market. Last week, China decided to take out its anger about Canada’s tariffs on Chinese electric vehicles, steel and aluminum on Canadian farmers (again). The 100% tariff on Canadian peas was a complete surprise, as China’s retaliation was expected to come through its investigation into Canadian canola dumping announced last fall.

China has been the dominant buyer of Canadian peas ever since India’s last set of tariffs kicked in back in 2017. When India dropped its pea tariffs in 2023/24 and 2024/25, Canadian exports have been more balanced between these two large destinations. The biggest volumes exported to China have been yellow peas but it is also a large buyer of green and maple peas, which are also included in the 100% tariff.

If past behaviour is any indication, the Chinese tariffs won’t go away anytime soon. This means they’ll likely last into 2025/26 and affect next year’s markets. China has been able to find other sources of peas, when it opened its borders to Russian peas in 2023 and just recently to Ukraine. Whether these Black Sea peas will be able to meet the quality specs for the food and fractionation industry remains to be seen.

Meanwhile, the Indian government has kicked the “tariff can” down the road another three months by moving its deadline for zero tariffs on peas to May 31. On the surface, that seems helpful but won’t likely trigger much new trade for a couple of reasons. First, these short-term deadlines make it difficult for traders to assemble and ship sizable amounts in those time frames. Second and more important, inventories of imported peas are still very large in India, with some reports indicating a million tonnes in storage. Pea prices in India remain under pressure and there’s little interest in bringing in more peas. Canadian exports to India had already dropped considerably in the past 2-3 months and the zero tariff extension won’t reverse that slowdown.

For the rest of 2024/25, Canadian exports of peas will be severely constrained. No more peas will move to China and not many to India. And we still have a simmering trade dispute with the US which has at times been a large buyer of Canadian peas. Some other countries, particularly in South Asia, could buy more peas. In December, for example, Bangladesh was the largest destination for Canadian peas. That said, stirring up more interest in some of these countries could require lower prices. Even so, ending stocks of Canadian peas in 2024/25 will be considerably heavier than expected earlier.

Just as (or maybe more) important is the question about what will happen in 2025/26. There are a few possibilities. One is that India could extend the zero tariffs again until sometime into 2025/26, which could allow a decent fall shipping program and help clear some of the heavy supplies. A resolution with China is also a possibility but feels like a long shot. Again, the Canadian pea market will need increased buying from some countries like Bangladesh that have not been consistent buyers in recent years. Even then, the Canadian pea market feels like it’s setting up for a very difficult year.

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