India is buying more Canadian peas and lentils than official export statistics suggest, say market analysts.
Sales to surrounding countries have exploded and some of that product is flowing into India illegally.
Bangladesh bought 452,797 tonnes of Canadian peas in the first half 2019, nearly double what it imported during the entirety of 2018.
Chuck Penner, analyst with LeftField Commodity Research, recently told delegates attending the 2019 Pulse and Special Crops Convention that he suspects some of those peas aren’t staying in the country.
“I saw some of the Indian folks in the crowd kind of nod and smile when I said that,” he said in an interview following the conference.
A few days after the conference there was a report in India’s Business Standard newspaper that India’s Border Security Force seized three boats from Bangladesh loaded with smuggled peas on the Myntdu river, while two more escaped and fled back to Bangladesh.
Penner said tariffs and sky-high yellow pea prices are enticing the smuggling activity.
Yellow peas that usually trade at a discount to desi chickpeas at the Port of Kanpur have eclipsed desi prices and created a record spread between the two commodities.
Penner spoke to traders at the conference who said a similar scenario is unfolding in Nepal, which bought 41,628 tonnes of Canadian peas in the first half of 2019, up from 28,496 thousand tonnes in all of 2018.
He doubts Pakistan is involved in the smuggling activities.
“That border is pretty well defended now. You’d have to be pretty brave or something to take stuff across from Pakistan into India these days.”
There are other more legitimate reasons why pulse sales to countries surrounding India are soaring.
“It’s not entirely nefarious. Partly it’s simply as prices get lower those tend to be the countries that buy more pulses,” said Penner.
Marlene Boersch, managing partner with Mercantile Consulting Venture, said the same countries are importing copious amounts of lentils.
Bangladesh purchased 103,145 tonnes of Canadian lentils during the first six months of 2019 compared to 98,343 tonnes for all of 2018.
Pakistan imported 89,083 tonnes during the first half of this year compared to a lesser amount for all of 2018.
Boersch agreed that the magnitude of the increases are somewhat suspicious considering all countries face the same 33 percent import duties on lentils entering India and 50 percent on peas.
So why would it be easier for Bangladesh and other neighbouring countries to ship to India than it is for Canada?
“I can’t quite corroborate it, but the difference is that when you come overland it’s easier not to declare,” said Boersch.
“I can’t show you the paper flow exactly on that (but) that’s what people say.”
Boersch said it makes it hard to determine how much India is actually buying.
But even its direct purchases of Canadian lentils are surprisingly high given the punitive duty.
The country bought 360,516 tonnes of Canadian lentils through the first six months of 2019 compared to 162,886 tonnes for all of 2018.
India is on pace to buy far more Canadian lentils than the 541,486 tonnes it purchased in 2017 before the import duty was implemented.
It is not the same story with peas though. Indian imports are a fraction of what they were before the pre-duty era.
Penner said that is because peas face a quantitative restriction in addition to the 50 percent duty.
Exporters from around the world are limited to shipping a combined 150,000 tonnes of peas to the country between April 1, 2019 and March 31, 2020.
But again, there are waivers and exceptions to that rule that end up with more peas moving into the country than specified in the quota.
He said the big thing that is limiting pea trade from opening up is that the Indian government is sitting on a stockpile of two million tonnes of desi chickpeas.
Penner said logic would dictate that some of those desi chickpeas would be substituted for yellow peas, causing pea prices to decline. But obviously some buyers believe there is no substitute for yellow peas.