India remains top lentil customer

High domestic prices in the Asian country mean foreign purchases can make sense even with 33 percent duties

Who was the top importer of Canadian lentils through the first half of the 2018-19 marketing campaign?

Was it the United Arab Emirates?

Nope.

How about Egypt?

Wrong again.

It was India. You know, the country that has a 33 percent import duty on Canadian lentils.

Despite that duty, India purchased 195,000 tonnes of lentils during the first half of the crop year, which is about double what was imported by the second biggest buyer, the UAE.

Chuck Penner, analyst with LeftField Commodity Research, said lentil prices are sky high in India and that is creating an opportunity for Canadian product, even with the punitive tariff.

Red lentil prices in India have ranged from US$400 to $600. Canadian bids are about C$400, or US$300.

“It can still work, even with a 33 percent duty,” he said.

Green lentil prices in India are extremely high, which is why Penner thought much of Canada’s exports would be greens. But 86 percent of what Canada shipped during that period was red lentils.

The pace of shipments to India is above last year’s volumes of 116,000 tonnes but well below the previous year’s 558,000 tonnes and the five-year average.

The big months for Canada were August, when 69,000 tonnes were shipped and January, when 71,000 tonnes were exported.

Penner said India is finally working its way through the large buffer of government pulse stocks.

In an article for Saskatchewan Pulse Growers’ Pulse Market Report, G. Chandrashekhar, a global agribusiness and commodities market specialist, said the government has 2.8 million tonnes of stocks, including 1.8 million tonnes of chickpeas and 600,000 tonnes of pigeon peas.

India had a disappointing kharif harvest in the fall of 2018 and the 2019 rabi crop being harvested now appears to be short as well.

The government set a target for 11.5 million tonnes of rabi chickpeas but Chandrashekhar believes it will be closer to 8.5 to 8.8 million tonnes.

Penner agrees with that forecast.

“Yields are going to come in well below average,” he said.

Yellow peas are used as a substitute for chickpeas in a variety of Indian dishes.

Canada shipped 110,000 tonnes of peas to India through the first six months of 2018-19. That made India the third-largest buyer, although well behind China’s 985,000 tonnes for that same period.

It was mostly yellow peas, despite greens selling for three times the amount in India. Penner has seen a YouTube video of Indian importers finding creative ways to capitalize on the green pea premiums.

“They’re taking yellow peas and putting green food colouring on them in a cement mixer,” he said.

“If they don’t get caught the profits are astronomical.”

How Canada shipped 110,000 tonnes of peas to India is a real head-scratcher, considering India has had a 50 percent import duty on peas since Nov. 8, 2017, and a 100,000 tonne quota on all pea imports from all countries since April 25, 2018.

Mac Ross, manager of market access and trade policy with Pulse Canada, said the initial quota was put in place until June 30, 2018. It was then extended a number of times by India’s Directorate General of Foreign Trade.

The extensions were challenged by importers in India’s Madras High Court. They argued the Directorate General of Foreign Trade didn’t have the authority to make the extension notifications.

Some ports stopped enforcing the quota while it was being challenged, which is why an estimated 200,000 tonnes of yellow peas were imported.

On March 29, India’s ministry of commerce issued a new notification allowing the import of 150,000 tonnes of yellow, green, dun and kaspa peas during the April 1, 2019, to March 31, 2020, period.

“The restriction is expected to be stronger and tighter and applied consistently across all entry ports,” said Ross.

He said there is no doubt that Canadian pulse exports to India are picking up, which is why Canada and India need a resolution to the fumigation issue.

The two countries issued a joint statement last year that they would reach an agreement on the issue before the end of 2018. That didn’t happen and India requested an extension at the end of December.

A fumigation derogation that allows exporters to pay a fee upon arrival in India rather than fumigate at home expires in June.

Exporters pay US$12 per tonne, which amounts to $600,000 on a 50,000 tonne Panamex vessel of peas.

Ross hopes the fumigation issue will be resolved after India’s general elections in May.

Penner hopes India may start dropping tariffs and quotas in mid-2019, which should lead to increased imports from Canada.

“It won’t be the boom years that we had in 2016-17, but it will certainly be an improvement,” he said.

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