Positive but Limited News from India
Less than a year ago, the Canadian pea market got a real shot in the arm when India announced it was allowing yellow pea imports into the country by dropping import tariffs from 50% to zero. That triggered a strong response in Canadian exports, with 833,000 tonnes of peas moving to India in a few short months.
In the months leading up to India’s decision, we had seen clues that something good might happen, but that extra demand was still a bit surprising. It was also very welcome news as buying from China, Canada’s dominant customer since India restricted imports in late 2017, started to tail off. Canadian exports to China have taken a sizable hit due to more competition from Russia and a slowdown in demand for peas in China’s feed market.
The initial announcement from India was very good news and added almost $2.00 per bushel to yellow pea bids in the middle of 2023/24. Unfortunately, the good times didn’t last all that long, with only smaller volumes since the big spike in trade. The reason for the slowdown is that, not surprisingly, the large influx of yellow peas into India from Canada (and Russia) caused pea prices there to drop hard.
Since those sharp declines, yellow pea prices in India haven’t shown signs of recovering. Peas that were bought earlier at higher prices suddenly dropped in value, and we’ve heard that many of them are still sitting in warehouses as Indian traders hope that prices improve and let them break even. In fact, some of those traders had been asking their government to reimpose pea import tariffs in hopes that prices would rise again.
This brings us to the current situation. The zero import tariffs were due to expire at the end of October. The chart shows us that Indian yellow pea prices are still near the lows. On its own, this would suggest the Indian government would reimpose tariffs again after October 31. On the other hand, the much larger desi chickpea market has been rallying strongly, and yellow peas can be used as a substitute, particularly in dal. It’s quite likely that these high prices for desi chickpeas were the reason the zero tariffs on yellow peas were extended to December 31.
While that’s good news, it won’t necessarily trigger a boom for the Canadian yellow pea market. Prices in India are still low and that will limit how much prices can rally here. And competition from Russia hasn’t entirely disappeared either, even if it has a smaller 2024 crop. So yes, Canadian farmers should see some better movement, but prices won’t exactly go through the roof.
There are a couple of other considerations. For example, what happens beyond December 31? We think that date was chosen because by then, the Indian government will have a handle on plantings for 2025 rabi crops. Low prices for peas will likely discourage planting of that crop but there’s plenty of incentive to grow desi chickpeas. If Indian farmers respond and plant more (and the weather is decent), there are good odds the import tariffs on yellow peas would be imposed again.
From a positive perspective, green pea prices in India are very high, which is raising rumours that India could drop those restrictions. If that would happen (there are no guarantees), it could add a bit of fuel to that portion of the market, with global supplies still limited in 2024/25.
Clearly, it’s hard to make market plans or acreage decisions with this type of start-and-stop interventionist policy. It’s frustrating for both Canadian and Indian farmers. Farmers’ decisions still need to be made based on sound principles of profitability and agronomics. That hasn’t changed.
Pulse Market Insight provides market commentary from Chuck Penner of LeftField Commodity Research to help with pulse marketing decisions.
