LETHBRIDGE – Saskcan Pulse Trading Inc. couldn’t have picked a better time to double its lentil splitting capacity, says the company president.
A few weeks after the expansion was completed, both India and Pakistan announced they were taking steps to curtail exports of processed pulse products.
“This is an opportunity to supply an Indian market that is short and an opportunity to develop new markets for the future, so it’s almost like a gift,” said Saskcan president Murad Al-Katib.
India has implemented a ban on all pulse exports until March 2007. Pakistan didn’t go that far, but the country has placed a temporary 35 percent duty on its pulse exports. Both countries are trying to keep domestic prices from escalating in the face of disappointing pulse harvests.
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That is good news for exporters of raw product but even better news for those in the business of selling split peas, lentils and chickpeas, said Al-Katib.
India and Pakistan have a long tradition of importing pulses, processing them and re-exporting the refined product to Saudi Arabia, Dubai, Bangladesh and Sri Lanka.
Government efforts to curtail those exports have created a golden opportunity for Canadian processors to get a foot in markets that have been untouchable until now. Pulse splitters have nearly one full marketing year to make a lasting impression with overseas buyers.
“I think there’s going to be a very big long-term impact,” said Al-Katib.
His company, which completed a $2 million expansion of its Regina lentil splitting facility in May, is already receiving new demand from places Al-Katib would have never expected, such as New Zealand and Australia.
That is just the tip of the iceberg, since India is the world’s fourth largest exporter of lentils.
Al-Katib said buyers in Asia and the Middle East are going to have to find a new source for a substantial volume of annual demand.
“We’re not talking a few containers here. We’re talking a few hundred thousand tonnes,” he said.
Tony Gaudet, president of Belle Pulses Ltd., a pea splitter that has plants in St. Isidore-de Bellevue and Duck Lake, Sask., hasn’t seen any additional demand materialize.
But buyers from Dubai who wanted to cancel contracts for July abruptly reconsidered their stances shortly after India announced its export ban.
“Two days later they all phone and say, ‘ship, ship, ship, as fast as you can.We don’t care when we get it, just ship.'”
Gaudet’s biggest competition over the years has come from India and Pakistan, two countries notorious for depressing processing margins through the use of cheap labour.
Pakistan, in particular, has become adept at importing Canadian yellow peas, splitting them, and re-exporting the end product to markets in the Middle East, shutting off tens of thousands of tonnes in potential Canadian trade to Iraq.
Gaudet is “moderately optimistic” new demand will start to show up on the books considering the response he got from his Dubai buyers.
However, to date there has been no price hike in split peas, while split lentils have soared to $560 per tonne from a pre-ban price of $475 per tonne.
Gaudet offered a word of warning to processors who are considering expanding their operations to take advantage of events halfway around the world.
“If you started building now, it will take you a year before you’re done. It might be all over.”
Al-Katib agreed. He said pulse splitting is a capital intensive endeavor. Investment decisions should be based on a long-term outlook, not a temporary blip in demand.
While the policy measures of India and Pakistan may not provide enough incentive to build a new business from scratch, they will certainly help cultivate new clients for existing processors abroad.
“We’re seeing a market opportunity here,” said Al-Katib.
