Indian crop offers no market reprieve

The crop is looking like it will be big, which isn’t good news for pulse growers hoping to regain access to that market

Canadian farmers shouldn’t count on India re-entering pulse markets anytime soon, says an analyst.

The Indian government recently released its fourth advance estimate of its 2017-18 harvest, and the crop just keeps getting bigger.

The new estimate is a record 25.23 million tonnes of pulses, which is 34 percent higher than the previous five-year average. The previous estimate was 24.51 million tonnes.

Indian farmers are showing no signs of shying away from growing pulses despite poor prices caused by the bin-busting 2017-18 harvest.

Growers had planted 32.8 million acres of kharif (summer) pulses as of Aug. 31, which is only slightly behind last year’s 33.6 million acres.

“I don’t see really any indication that farmers there are giving up on acreage in a meaningful way. It’s still historically high,” said Greg Kostal, president of Kostal Ag Consulting.

With another big crop on the way, he doesn’t see the government reversing its import quotas and punitive tariffs.

“As long as domestic prices are saggy, I think you have to expect the protectionist type policy to linger,” he said.

That means Canadian pea growers will have to rely on other markets to pick up the slack. China has been buying more peas for both food and feed purposes, and other countries have been stepping up purchases as well, but Kostal doesn’t think it will be enough additional demand to make up for the loss of India.

Kostal noted some weather forecasters are calling for an El Nino to develop, which would lead to a drier rabi (winter) growing season, when the bulk of India’s 2018-19 crop of pulses would be grown.

The Indian government got hearts racing last week when it sent a letter to traders Aug. 29 informing them that it was withdrawing its quantitative restrictions on pea imports.

The restrictions were put in place April 25 when the government told importers they could bring in a maximum of 100,000 tonnes of peas from April 1 to June 30. The order was later extended to Sept. 30.

“By the time they put it on, (the quota) had really already been filled, so effectively the quantitative restriction was blocking any trade from happening,” said Carl Potts, executive director of Saskatchewan Pulse Growers.

Much to the chagrin of exporters, India reinstated the quota Aug. 30. There are conflicting reports on what happened, but it involved some sort of court battle.

There has been progress on another non-tariff trade barrier.

In February 2018, the prime ministers of Canada and India agreed that the two nations would work together to finalize an agreement on the long-running fumigation issue by the end of the year.

Canada submitted a proposal last year detailing how there is no evidence that the nematode pest India is concerned about exists in Canada and how the grain handling system ensures that Canadian exports are free of such pests.

Potts said Canada has invited an Indian delegation to travel to Canada in late September to review its systems-based approach in hopes of resolving the issue once and for all. India has accepted the invitation.

The trip will include presentations from the Canadian Food Inspection Agency, the Canadian Grain Commission and the pulse sector, which will explain to the Indian delegation how Canada’s handling system mitigates the risk of introducing regulated pests without the need for fumigation.

It will also include a visit to a farm, pulse processing plant, inland grain terminal, government plant health and entomology labs and terminal facilities at the Port of Vancouver.

“(The system) has been detailed on paper, but we believe it would be helpful from an understanding perspective to be able to see those elements,” said Potts.

The fumigation issue puts Canadian exporters at a competitive disadvantage to their U.S. counterparts.

Canada cannot fumigate for a variety of reasons. As a result, Canadian shipments that arrive in India face a fumigation penalty of five times the inspection fee plus the cost of fumigation. U.S. shipments by comparison face one times the inspection fee plus the cost of fumigation.

For a 50,000 tonne vessel, that amounts to a total penalty of $740,040 for a Canadian shipment compared to $148,000 for a U.S. shipment.

“What’s the scientific or technical basis for having differences in the fees associated with the U.S. and Canada?” said Potts.

He is hopeful that will soon be a moot point if Canada and India come to a permanent solution to a trade irritant that has been lingering since 2004.

“We believe that it’s still totally doable by the end of the year,” he said.

“I don’t think that this is an incredibly complex thing to come to agreement on.”

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