Predictions of a giant leap in Indian pulse production have sent shock-waves through Canada’s pea and lentil industries.
India’s government has set a goal of 16.5 million tonnes of pulse production in 2010-11, up from the recent average of about 14.5 million tonnes.
The government’s first advance estimate of kharif or summer production is six million tonnes, up 1.7 million tonnes from last year.
The government is attempting to carry that momentum into the winter or rabi planting season with last week’s announcement of a 19 and 20 percent increase in minimum support prices for chickpeas and lentils respectively, compared to a two percent hike in the wheat minimum support price.
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The combination of attractive support prices and ideal fall planting conditions due to the late retreat of summer monsoon rains has theBusiness Standard,India’s leading business newspaper, forecasting 18 to 19 million tonnes of combined kharif and rabi pulse production.
That would be enough local output to satisfy India’s annual demand, a disturbing thought for a Canadian pulse industry that directed 36 percent of its pulse exports to India in 2009.
“Does this mark a paradigm shift in Indian pulse production levels? If that’s happening, it really changes things,” said Brian Clancey, editor of theStat Publishingnewsletter.
“If this is the start of that, then we may have lost a million tonne market and we’re going to have to find that somewhere else.”
Murad Al-Katib, president of Alliance Grain Traders, a leading Canadian pulse processor and exporter, said it’s a long way to harvest.
Al-Katib doesn’t view rising minimum support prices (MSPs) as a “game changer.” In fact, he forecasts a widening in India’s supply-demand gap.
“We think that consumption will continue to rise faster than production and we continue to see India as a major driver for North American pulses.”
Carl Potts, director of market development with Pulse Canada, said the pulse MSPs are below market prices, so their influence on rabi plantings will be limited to providing growers with a floor price. Traders say Indian farmers might have trouble selling pulses to the government if the minimum support prices are triggered.
Even if Indian pulse output rises by 25 to 30 percent, there is nothing saying consumption won’t jump by an equivalent amount.
Potts believes there will always be a home in India for Canadian peas and lentils, which are cheaper than many Indian pulses. But this year’s production forecasts reinforce the need for Canada to find other uses and markets for its pulses.
Clancey said the floor price India has established for chickpeas and lentils amounts to $479 and $513 per tonne respectively.
“That is a concrete statement by the government that it is sick and tired of importing at least three million tonnes of pulses every year.”
India’s Pulses Importers Association predicts 1.5 to two million tonnes of imports in 2010-11, half the normal volume.
Clancey doubts that forecast as well as the outlook for 18 to 19 million tonnes of production.
“That talk is really aimed at convincing Canadians and convincing Australians to reduce their prices.”
But Clancey thinks 17 million tonnes of production is a reasonable estimate, which is 2.5 million tonnes more than usual. Canadian growers won’t feel the impact of a record 2010-11 Indian harvest, if it happens, until next year.
He said it’s good Canada’s pulse export program to India got off to a strong start this year because demand could cool in the coming months. In the first two months of this crop year, licensed terminal facilities shipped 531,500 tonnes of peas to India compared to 238,400 tonnes during the same period last year.
“This year, it looks like we’re going to sell everything at the beginning and have a big bang start and a wimpy finish,” said Clancey.
In addition to the potential of slumping Indian demand, Canadian pulse exporters could face stiff competition from Australia, which is expected to harvest a record chickpea and near-record lentil crop.
Clancey said a good indication of how serious India is about curbing imports will be what it does with the pulse import subsidy and the removal of tariffs on imported pulses, two policies set to expire on March 31, 2011. He will also be watching what the government does with next year’s kharif minimum support prices.
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2007-08
2008-09
2009-10
14.76
14.57
14.60
1.20
1.39
1.38
