India Situation Update

This is the time of year that we look more closely at the situation with Indian pulse crops, as the rabi season is when Indian farmers plant chickpeas, lentils and peas, the crops we’re more concerned about in Canada. Normally, the focus is on acreage and crop prospects. While those are still important, the added layer of government policy has become a key feature in the outlook. But let’s start with crop production.

This year, Indian farmers started the planting season on a strong note, with pulse acreage running ahead of average. There are some questions about the Indian reports, but they show very small gains later in the season, with total pulse acreage currently 11% less than last year and 12% below the 5-year average. According to these reports, Indian farmers have planted 24.4 mln acres of chickpeas (6% less than last year), 4.3 mln acres of lentils (down 11%) and 2.2 mln acres of peas (12% less).

Of course, acreage is only one part of the production equation. Across much of India, satellite vegetation maps show crop conditions are better than average, with the early harvest scheduled to begin in a few weeks. Keep in mind, conditions were very positive last year; comparing the vegetation maps against last year shows key growing areas in north-central India this year in worse shape. These two comparisons suggest 2025 yield potential could be better than average but less than the 2024 harvest.

This brings us to the other main topic in the outlook, Indian government policy. With acreage and crop prospects smaller than last year, it’s possible the Indian government will decide to keep import tariffs off for peas, lentils and chickpeas. This would help keep food prices low for Indian consumers but wouldn’t make farmers very happy.

The current situation is that import tariffs are set at zero for peas, lentils and chickpeas. The deadline for peas has been extended several times and the latest deadline is February 28, unless it’s extended again. For lentils and chickpeas, the deadlines are March 31 and those can also be extended.

Because the government’s goal for the zero tariffs has been to keep food costs down, prices for the various pulses can be a clue about possible changes in policy. For peas, prices have been dropping ever since the tariffs were zeroed out in late 2023 and have continued to decline steadily as imports from Canada, Russia and elsewhere flowed into India. With Indian pea prices now at the lowest point in years and the harvest soon to arrive, it may encourage the government to impose import tariffs again to protect its farmers.

Desi chickpea prices rose sharply last year in response to a smaller 2024 Indian harvest but have now given back all of those gains. The latest steep declines are showing up as the big Australian crop is now arriving in India and boosting supplies in the country. This could allow the government to reimpose tariffs on desi chickpeas at the end of March. And as yellow peas are a substitute for desi chickpeas, the lower chickpea prices could also support the return of tariffs on peas after February 28.

The situation for lentil tariffs seems a bit clearer. Prices in India are holding steady, in line with the government’s Minimum Support Price and are also helped by the drop in Australia’s recent harvest. The steady prices suggest there’s less chance of tariffs being reimposed on lentils at the end of March.

Crop markets are full of uncertainty and the situation in India is no exception. We are used to the ups and downs in prices that are caused by smaller or larger crops. With the Indian crop getting closer to harvest, that uncertainty is starting to fade. But the unpredictability of government policy remains just as large as ever.

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

Tariff Exposure for Pulse Crops

There’s a lot of concern about possible import tariffs by the US and their impact on Canadian agriculture. Of course, there’s no shortage of opinions about whether (or how) across-the-board tariffs would actually occur under the new Trump administration. Various scenarios are possible; the situation could be resolved and tariffs could be avoided altogether, only certain products might face tariffs or the percentage could be lower than the initial 25% number that’s been announced.

Despite the uncertainty, it’s still worth knowing a bit more about Canada-US pulse trade and how serious the issue could be for those crops. The answer (as it often tends to be) is, it depends. The importance of the US as a destination varies considerably by crop.

Canada’s pea exports are dominated by China and India. Over the past five years, exports to the US have averaged 200,000 tonnes, only 7% of Canadian exports. The US imports small amounts of yellow, green and split peas from Canada but the largest category, over 80% of the total in the last two years, is peas to be used as planting seed. This indicates that pedigreed seed growers would face the largest threat while other trade would see much less impact.

For lentils, the US is an even smaller trade partner with Canada. In most years, the US accounts for less than 5% of Canadian lentil exports, averaging less than 75,000 tonnes over the past five years. Just like peas, the category of “lentil seeds used for sowing” usually accounts for the largest part of the trade. As a result, US tariffs on Canadian lentils would mostly affect the pedigreed seed industry and would impact growers in the US as much as in Canada.

When it comes to chickpeas, disruption in Canada-US trade would have a larger impact. Over the past five years, the US has accounted for roughly a quarter of exports and is the largest single destination for Canadian chickpeas. While chickpeas as planting seed are a sizable part of the trade, two thirds to three quarters of the chickpeas shipped to the US are not used as seed and are destined for food and petfood sectors. Any blockage to trade would have a sizable impact on industry on both sides of the border.

Canadian dry bean exports also rely heavily on the US, which is the largest single destination and has accounted for an average of 30% of Canadian exports in recent years. Like the other pulses, planting seed is a large part of the trade, accounting for close to 60% of Canadian exports to the US in most years. Black and pinto bean exports were also a good portion of the trade. Of course, the North American dry bean market could also be affected by disruptions in US-Mexico trade, potentially shifting more Mexican business toward Canada.

There’s still a lot of uncertainty in this outlook and it’s possible that tariffs can be avoided. That would be the best case, as trade disruptions are especially damaging to a country like Canada, which depends heavily on exports. If tariffs do occur, the impact on pulse crops would be mixed, with certain sectors and segments affected more than others.

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

Waiting Out the Seasonals

Crop prices tend to behave in certain ways at certain times of the year. That makes sense since crop production happens at specific times of the year and supply levels change according to those seasons. The seasons affect both farmers’ selling behaviour and buyers’ activity. No surprise there.

Seasonal price tendencies are often reliable, although prices in a given year can deviate from the pattern due to unusual circumstances like crop failures and shocks in export demand (either good or bad). The most certain part of the pattern is that prices bottom out in the fall. Again, that’s hardly a surprise. Farmer deliveries spike at harvest time while export shipments are also picking up. Even in the 2021 drought year when crop conditions headed south, pea prices bottomed out in the summer. That said, it was a few weeks earlier than usual and didn’t last long.

While the seasonal bottom is not news, the weeks on either side of the lows can be instructive. It doesn’t happen every year, but prices for yellow peas tend to start heading lower in mid-June (late May for green peas). Even though supplies are at their lowest levels all year, buyers are already waiting for the next harvest in a few weeks. Some farmers might also be cleaning out their bins, especially if the crop in the field is looking good.

In 2023/24, yellow pea bids made solid gains in late spring, mainly due to the return of Indian demand along with shrinking Canadian supplies. Even so, it’s unlikely that prices can avoid the downward pull of the seasonals for much longer. This year’s very tight supplies could limit how far yellow pea prices will decline but the outlook for the 2024 crop (either good or bad) another key factor.

Once the harvest lows are over, prices will turn higher. The inevitable question of “how far” is the big unknown. Of course, the main factor is the size of the crop, not just in Canada but in other exporting countries. It’s far too early to have a firm handle on this year’s yields and crop size in western Canada and elsewhere. In the case of yellow peas, Russia has become the biggest competitor and crop estimates there have been slipping recently due to drought and frost. For green peas, the US is a sizable exporter and the crop there is looking positive.

Export demand is the other factor that determines how fast and far prices come off the harvest lows. For yellow peas, 2024/25 is the first year in a long while with two large buyers, India and China. Even so, there are large questions about both countries. India cut its import tariffs to 0% but for now, that’s only until the end of October. Chinese pea imports have been quieter recently and it’s not clear how long that will last. And in both countries, Russia is a larger competitor despite downgrades to its 2024 crop.

Even though markets are unpredictable, the harvest lows are as close to certain as possible. When making marketing decisions around those lows, it’s important to recognize the patterns. When prices start to drop in summer, that doesn’t have to mean the market is bearish and that farmers should bail out. They may just need to be patient, since the market is just doing what it normally does. Likewise, the postharvest rally isn’t necessarily a sign that the outlook is outright bullish and will keep going higher through the rest of the year. Rather it’s often just the typical recovery as the supply and demand return to a more stable balance.

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