Gov't may release some of its stocks into the market, which would reduce need for imported lentils
SASKATOON — The red lentil market hinges on what the Indian government intends to do with its bloated stocks of the crop, says an analyst.
The National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) is sitting on a massive stockpile of 800,000 tonnes.
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Binod Agarwal, managing partner of SGR Agri, believes NAFED could potentially release 600,000 tonnes of its reserves into the Indian market.
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“To the best of my knowledge, they have never held more than 800,000 tonnes of stock,” he said in an email.
“Some tonnes will need to be flushed.”
The country typically imports about 1.4 million tonnes of red lentils annually. He believes that volume will drop to 800,000 tonnes if the government releases its stocks.
That would obviously be bearish for lentil prices.
However, he noted that it is impossible to predict what NAFED will do because it never provides full clarity to the market.
“NAFED will obviously keep the interest of domestic growers in top priority and act according to the local market to keep the prices in check,” he said.
“As of now, the prices of lentils in India aren’t too high to be concerned about; (that is) the reason why NAFED is sitting out for the time being.”
If NAFED releases stocks, it would eventually need to replenish its supplies with domestically produced lentils, leaving a gap that would then have to be filled by imported product.
Agarwal said the trade believes Indian farmers produced one million tonnes of red lentils in 2024. That is well short of the government’s estimate of 1.79 million tonnes.
“No one knows what the exact number is,” he said.
“If the production is more and NAFED sells its stocks, imports will definitely be lower than 800,000 tonnes.”
Lentil imports are duty-free until March 31, 2025, although he expects that deadline will be extended.
Canada and Australia will be facing competition from the Black Sea region. SGR has heard Kazakhstan will export 250,000 of reds and Russia another 100,000 tonnes.
However, there are bullish factors to consider as well.
India’s trade expects the government to increase its minimum support price (MSP) for lentils by six per cent.
If that happens, the MSP would likely be higher than the market price, encouraging farmers to commit all their stocks to the government.
That means there would be a net 400,000-tonne shortage of product because the government would be purchasing one million tonnes of new crop while releasing 600,000 tonnes of its old stocks.
“India would have to buy approximately 20 per cent more than what they usually buy from the international market,” Agarwal said in a recent newsletter to clients.
Stocks held by the trade in India are “close to nothing” as importers focus more on amassing chickpea supplies.
Buyers had also been anticipating “magnificent” crops from Canada and Australia, but that did not materialize.
Australia’s crop will likely be smaller than one million tonnes, well below the current government estimate of 1.7 million tonnes.
Another potential bullish factor is that soaring desi chickpea prices could also shift some demand to lentils, said Agarwal.
Contact sean.pratt@producer.com
