Lentil prices likely to rise as India drops duty

The elimination of the 30 percent duty on Canadian lentils makes trade to India much more feasible. | file photo

India is slashing its import duty on lentils, opening up new trade possibilities with Canada’s top customer just before harvest.

The new applied duty for most exporters is 11 percent effective July 27, down from 33 percent.

The only exception is the United States, which faces a 33 percent duty, down from 55 percent.

There is no expiry date on the reduced duties.

“Hopefully, we see that stay in place through into the fall as we’re starting to harvest across the West,” said Mac Ross, director of market access and trade policy with Pulse Canada.

A similar policy shift happened on June 1, 2020. The reduced rates stayed in effect through the end of that year with the exception of September when they jumped back to 33 percent.

India was Canada’s top lentil market in 2020, importing nearly one million tonnes of the crop, almost double the volume purchased by Turkey, which was the next biggest buyer.

Ross has no idea how much India will buy in 2021. That will depend on factors like how long the tariff reduction remains in place, what yields are like in Western Canada and the availability of shipping containers.

“There is always going to be the opportunity to supply them with pulses when their policy allows for it and right now it allows for it, so hopefully that continues into the fall here and further,” he said.

Marlene Boersch, managing partner of Mercantile Consulting Venture, is forecasting another sizable export program to India.

She said the duty reduction was anticipated but it’s still a big relief when it happens.

“To me, it basically signals that there is some trouble there,” she said.

“They don’t quite know how to contain their food price inflation and they will be needing more pulses.”

India initially tried to contain prices by implementing a 200-tonne stock limit for retailers, wholesalers and importers.

That policy lead to huge pushback from India’s pulse trade. The government relented and revised the order, removing the limit for importers and upping the amount to 500 tonnes for wholesalers.

For a while it looked like trade would be seriously curtailed regardless of what the duty was but that isn’t the case after the revisions were made, said Ross.

“It definitely took the clamp off the hose a little bit,” he said.

Stat Publishing editor Brian Clancey said in a recent article that the anticipation of small lentil crops in Canada and the United States likely contributed to India’s decision to reduce the duty.

He noted that some exporters are forecasting a 30 to 40 percent reduction in Canadian yields this year compared to last year.

Stat estimates the 2021 crop could be as small as 1.63 million tonnes, down from 2.65 million tonnes given average yields.

Ross said India’s constantly fluctuating import policies are a never-ending source of frustration for Canadian farmers and exporters because there is no predictability or consistency.

But when trade is flowing it is a buyer that cannot be ignored.

“It remains the biggest pulse market in the world, the centre of gravity for the international pulse market,” he said.

Canada’s pulse industry does not anticipate a similar easing of trade restrictions regarding peas.

India has a 50 percent import duty on peas. It also has a 150,000 tonne import quota for the crop that expired on March 31 but appears to be informally extended. The quota allows for 75,000 tonnes of green peas and 75,000 tonnes of others but there is an outright ban on yellow peas.

The government is trying to protect its chickpea growers. Yellow peas are a cheap substitute for chickpeas.

But the import restrictions violate World Trade Organization rules and Canada is attempting to get India to abide by those rules, said Ross.

Boersch said the Indian government is constantly performing the delicate balancing act of trying to appease consumers by keeping food price inflation in check while simultaneously assuring that the nation’s farmers are adequately compensated for growing pulses.

She said the stock limit policy did not walk that line because it would have blocked the import of pulses, which help keep food prices in check.

“So they’re changing tack again. It’s not a well-co-ordinated strategy,” she said.

She noted that the duty reduction might fail as well because North America is going to have a short crop of lentils and there are a myriad of problems surrounding ocean freight and container availability.

“From an execution point of view, I’m not quite sure how you would handle this. It makes a difficult market (more) confusing,” said Boersch.


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