India’s attempt to keep pulse price inflation in check hasn’t worked on one important crop it imports.
Spot prices for yellow peas rose 41 percent on India’s National Commodity and Derivatives Exchange in 2007. That happened despite the government’s best efforts to encourage imports of the crop to boost supply and drive down domestic prices.
In 2007, India banned exports of pulses, removed import duties and granted 15 percent subsidies to state trading agencies that bought imports to help contain soaring food costs.
“The measures they instituted just haven’t been good enough to stem food price inflation,” said Marlene Boersch, managing partner of Mercantile Consulting Venture Inc., a Winnipeg agricultural consulting firm.
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Boersch said the 15 percent buying subsidy wasn’t enough to offset a doubling in Canadian yellow pea prices. Buyers are paying $400 US per tonne f.o.b. Vancouver for the commodity, up from $200 per tonne last January. On top of that, importers are facing much higher ocean freight rate charges.
But India’s inflation-fighting measures do appear to have had an impact on chickpea prices, which fell 13 percent in 2007. Boersch said that is because the government has had some success increasing domestic chickpea production and because the country is increasingly filling chickpea demand with cheaper yellow pea imports. Although rising in price, yellow peas are still cheaper than chickpeas.
Carl Potts, Pulse Canada director of market development, believes India will continue the policies in 2008.
“I would expect them to continue to waive the import duty and to offer some subsidized imports of key pulses including Canadian yellow peas,” he said.
Potts said yellow pea shipments to India should reach one million tonnes in 2007, which is the first time Canada will have shipped one million tonnes of pulse product to one country. To the end of November, exactly half of Canada’s yellow pea exports went to that one destination.
“That’s why access to this market it critical,” he said.
Earlier this month, India extended a temporary measure allowing Canadian exporters to fumigate for stem and bulb nematode pests at destination rather than the origin to Sept. 30, from the earlier deadline of March 31.
That gives Canada more breathing room to find a permanent solution to a phytosanitary issue that could disrupt sales to India and jeopardize the rise in Canadian pulse values. Canada can’t fumigate for the pests during winter, so it would have to find a new home for half of the yellow pea crop.
Potts said the new Sept. 30 deadline would come at an inopportune time if no permanent agreement can be negotiated.
“That’s right in the heart of the busiest shipping period for yellow peas to India,” he said.
Pulse Canada told Indian authorities finding a resolution to the issue will eliminate costs and risks from the system, reducing the landed price of yellow peas in a country that is attempting to keep inflation in check.
Boersch expects another strong year for yellow pea prices. Despite questions on India, she said demand will remain strong due to a rising population and looming supply problems.
Pulse plantings in India are down 2.6 percent from last year and the cumulative rainfall from Oct. 1 to Dec. 31, 2007, was reported as scanty or deficient in 27 out of 36 meteorological subdivisions, according to the government’s latest crop report.
On top of that, Canadian exporters will likely face less competition from European product in 2008 as producers in that region explore alternative crops.
Those factors have already been built into new-crop contracts of $7.50 to $8 per bu. for yellow peas. There could be further increases throughout the year but nothing like 2007, said Boersch.
“The increases will be smaller because we are now talking $8 peas and not $3.50 peas.”
Last week, India issued a tender for another 140,000 tonnes of yellow peas from Canada for delivery between February and April 2008.
That has driven spot pea values to $10 per bu. in some areas. Canada only has about 300,000 tonnes of stocks on hand, so not a lot of producers will be able to take advantage of that price, said Boersch.
