Pulse exports off to slow start

Big crops in India, Turkey mean Canadians will have to wait for supplies to be used up

Peas and lentils are not going to be flying out the door right off the combine like they have the last couple of years, says a major processor and exporter of the crops.

An oversupply of domestically produced pulses in key markets such as India and Turkey has resulted in a poor finish to the 2016-17 campaign and will mean a slow start to the 2017-18 shipping season.

Murad Al-Katib, president of AGT Food and Ingredients, said the past couple years have been an anomaly with unusually strong export programs early in the marketing year.

For instance, Canadian companies shipped more than one million tonnes of lentils from September to November in each of the last two years compared to 500,000 to 700,000 tonnes in the two years prior to that.

This year is shaping up to be the opposite, with slower than normal exports to begin the campaign because of excess stocks in key markets.

The Indian government has intervened with tactics designed to help reduce stocks and raise depressed pulse prices, but those strategies, such as anti-hording regulations and non-tariff trade barriers, have been largely ineffective.

“The current policy of India regarding prices and supply levels may have had an opposite to the intended effect,” Al-Katib told investment analysts during the company’s second quarter results conference call.

The lacklustre demand has resulted in AGT’s processing plants running at a 51 percent use rate during the second quarter of 2017.

“On our pulse side, this was about as low as utilization has got, even in the 2011 period,” he said.

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Al-Katib expects resumption in demand later in 2017 as Turkey and India work their way through their domestic production surplus.

He noted that while this year’s monsoon rains have been close to normal for India as a whole, the distribution of those rains has been quite uneven at a state level.

“You actually had drought conditions in certain areas and actually surplus conditions in others, which have a number of analysts in India predicting that the harvest will not be as large as government forecasts had projected,” said Al-Katib.

According to the Aug. 8 edition of the U.S. Department of Agriculture’s Weekly Weather and Crop Bulletin, rainfall in Madhya Pradesh and Maharashtra has been 50 to 75 percent of normal since July 1.

About half of India’s pigeon pea crop is planted in those two states. Pigeon peas are one of the main pulses that are in surplus in India and have been driving down prices.

Farmers produced 4.78 million tonnes of the crop last year, an 87 percent increase from the previous year, so a short crop would be a welcome development for pulse exporters. Canadian green lentils are a substitute for Indian pigeon peas.

Indian farmers had seeded 9.86 million acres of pigeon peas as of Aug. 11, which is down 19 percent from last year but up nine percent from the previous five-year average.

The India Meteorological Department’s rainfall statistics are not as dismal as the USDA’s. It is reporting that since June 1 rainfall was 11 percent below normal in West Madhya Pradesh, a 13 percent deficit in East Madhya Pradesh and a seven percent surplus in Maharashtra.

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Al-Katib said another encouraging development is the Indian government’s new policy restricting pigeon pea imports to a quota of 200,000 tonnes this year, down from 703,540 tonnes the previous fiscal year ended on March 31, 2017.

“It’s a measure that we see may have a positive effect to clear up surplus stocks of pigeon peas and may have the effect of stimulating India’s local market,” he said.

Al-Katib was asked about India’s methyl bromide fumigation policy, which has the potential to disrupt sales to that important market.

He said Canada’s exemption to the policy expires Sept. 30. Every other market has an exemption until Dec. 31.

“We see no reason not to be optimistic about an extension of our deadline in Canada to at least match the Dec. 31,” said Al-Katib.

Canada is seeking a long-term exemption because it doesn’t have the pests of concern and winter temperatures would eradicate them anyway.

Even if India does not grant Canada another extension, it could continue shipping pulses to that market by paying a five-times penalty.

“To clarify what a five-times penalty means is, if you don’t fumigate here you can ship and you’ll pay around a $12 a tonne penalty,” he said.

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“Again, $12 a tonne isn’t great but it’s not the end of the world. The supply chain may have an ability to bear that in some fashion.”