Pulse group’s finances shrink with Indian demand

India’s import tariffs on peas and lentils are having a profound impact on the finances of Saskatchewan Pulse Growers.

The association was already budgeting for a $2.8 million deficit for 2017-18 based on revenues of $18.7 million and expenses of $21.5 million.

However, since the budget was approved in June, India decided to slap a 30 percent import tariff on lentils and a 50 percent tariff on peas.

Lentil prices have dropped by eight to 10 cents per pound and yellow peas by $1 per bushel in the wake of India’s tariffs.

SPG is now forecasting levy revenues of $10.8 million, or $6.5 million lower than first budgeted.

“With that major reduction in expected levy revenue, we’re currently forecasting our budget deficit at the end of this fiscal year to be about $9 million compared to $2.8 million at budget time,” said Carl Potts, SPG’s executive director.

SPG chair Corey Loessin said India’s import tariffs are having a profound ripple effect across the entire Canadian pulse sector.

“It’s going to mean some lower acres, some lower prices, reduced grower returns and obviously reduced revenue for our organization,” he told farmers attending SPG’s annual meeting.

“This will require SPG to maintain a strong focus on priorities and make certain reductions in areas.”

SPG came under fire at its annual general meeting two years ago for building up its accumulated reserves due to sky-high pulse prices and expanding pea and lentil acres.

In response, the organization decided in 2016 to reduce its mandatory levy to 0.67 percent of sales from one percent.

The organization’s accumulated reserves reached $26.2 million as of Aug. 31, 2016. They were drawn down by $3.5 million the following year and will drop another $9 million in 2017-18 as levy revenue dwindles.

Loessin said the board intends to extend the levy reduction for one more crop year until July 31, 2019. A motion to that effect was passed at the annual general meeting.

Potts said that will take the accumulated surplus down to the internally restricted level of about $6.5 million by Aug. 31, 2019.

Dave Sefton, a grower from Broadview, Sask., said he wonders what the board intends to do with the levy beyond 2019.

“It becomes pretty obvious that you can’t carry on with a deficit budget beyond 2019, so what level will you be going back with your levy at that point?” he said.

Loessin said it is difficult to foresee what will happen beyond 2019 but he agreed that they can’t go below the restricted surplus level.

Potts said 90 percent of SPG’s revenue is generated by the levy, while 60 percent of its expenditures are on research and development.

SPG plans to spend $12.9 million on research in 2017-18. The next two big-ticket items are $3 million on market promotion and $2 million to help fund Pulse Canada.

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