Canadian pulse industry officials and analysts are getting the sense India is shifting away from subsidizing pulse purchases, a move that many believe would benefit Canadian farmers.
India’s state trading firms have imported millions of tonnes of pulses, much of which has come from Canada, with the encouragement of a 15 percent government subsidy in the past two years.
In a recent Stat Publishing article, editor Brian Clancey said there are mounting doubts whether that policy will be around in the next fiscal year, which starts in March.
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Carl Potts, director of market development with Pulse Canada, has the same feeling.
“I have been hearing rumours as well that the government may not be asking (state trading companies) to do as much (buying) now,” he said.
The goal of the subsidy program is to keep food price inflation in check, an objective that has been helped recently by tumbling global commodity prices.
Another factor lending credence to the rumour is the expansion in India’s rabi pulse plantings. Farmers have sown 29 million acres of chickpeas, peas, lentils and other pulses so far this fall, up eight percent from a year ago. If there is a good harvest, that will also help relieve food price inflation.
In 2008-09, the Indian government has targeted 1.5 million tonnes of subsidized imports through state trading companies.
Potts said there would be better management of inventories if that business returns to the hands of the private sector.
Purchases would be spread throughout the year rather than all at once, leading to better delivery opportunities for Canadian farmers.
“You might not have as large of swings in inventories and prices,” he said.
A senior trader with a Canadian pulse firm who asked not to be identified would love to see a return to a commercial trade environment because India’s government tender system is flawed.
“This system is a disaster. It only works when you’ve got prices constantly going higher,” he said.
State trading companies tendered for yellow peas this summer when freight was $140 per tonne and the free-on-board price of the commodity was much higher.
The result is they ended up paying $150 to $200 per tonne over today’s values.
The government buyers are honouring their contracts but are dragging their feet on shipments and haven’t made further purchases, creating a strong possibility of a burdensome one million tonne pea carryout in Canada.
“There really hasn’t been any business that has gone on since those tenders,” said the Canadian trader.
He hasn’t heard anything about the demise of the government subsidy program but if there is a return to commercial trade, that would be good for Canadian pulse values and delivery opportunities.
“The prices would probably be more stable and there would be a flow to the trading,” he said.
“Right now it’s just a free-for-all with the tender system.”
While the 15 percent subsidy program might be drawing to a close, India’s Ministry of Consumer Affairs, Food and Public Distribution recently announced a different subsidy program.
State trading companies will be paid a subsidy of $210 US per tonne to import pulses for resale to state governments for distribution, which is a form of food aid.
But Potts said most of the pulses moving through that lucrative program are regionally produced crops like mung beans, pigeon peas and black matpe.
“I’m not really expecting a big impact on the Canadian pulse side of things,” he said.
