Canada Markets

In advance of Prime Minister Justin Trudeau's visit to India on February 17-23, CEO of Pulse Canada Gordon Bacon planted a seed with his editorial in the HinduBusinessLine.com titled India-Canada Pulse Points are Strong. In this piece, Bacon describes the need for balance between the world's two pulse superpowers, which includes India as the largest producer and consumer of pulses, as well as Canada, the world's largest exporter. "When leaders of the biggest pulses players in the world arrive at a shared understanding of the importance of pulses to farmers in both countries, it will augur well for the nations' trade relations."

In response to India's record 22.9 million metric ton crop produced in 2016/17, a sharp rise of close to 40% from the previous year, along with hopes for a large crop in 2017/18, India has imposed a number of measures to protect its domestic industry. In late 2017, an import duty of 50% was levied against dry peas, while lentils were later slapped with a 30% duty and recently the chickpea duty was increased from 30% to 40%.

The challenge is to work with India to find a balance between their domestic food policy while recognizing the importance of pulses in addressing food security around the world. Bacon suggests that nearly all pulse-producing nations will pare acres dedicated to pulses in the year ahead and this should be a concern to the world's largest buyer.

India's actions have been criticized in both countries. Murad Al-Katib, CEO of AGT Food and Ingredients has told media that he doubts India will achieve goals of self-sufficiency and will return to the market in the months to come, depending on the size of the winter Rabi crop. With consumption pegged at 24 mmt and growing at a rate of over 1 mmt per year, it would seem that India's objectives are lofty.

A recent article in the HinduBusinessLine.com titled Self-sufficiency Achieved in Pulses ... Really?, author G. Chandrashekhar reminded readers that "it took one bad year (2015-16)to change the mood from euphoria to despair and desperation; and everyone knows how the government had its back to the wall in fighting shortage and price escalation."

The author suggested that after planting seed held back is accounted for, along with processing losses in the splitting process, current record production levels still fall far short of meeting self-sufficiency within India. As well, he noted the current policy is poorly focused on production, while should rather be focused on consumption levels given the low cost of pulses as a protein source in order to achieve what he terms "nutritional security."

As seen on the attached chart, both large green lentils and red lentils have recovered slightly from last week's lows, although remain sharply lower than weekly highs reported in 2016/17. As of Feb. 14, large greens were reported at $32.57/cwt, down 51% from the high reached last crop year, while reds were reported at $17.56/cwt, down 45% from last year's weekly high as reported by Saskatchewan Agriculture.

A longer-term perspective shows large green lentils trading in the lower 23% of the range traded over the past five years, while reds are price very near the five-year low.

While not shown, yellow peas have stabilized at $6.75/bushel are 29.5% lower than the 2016/17 weekly high reported, while are trading in the lower 9% of the five-year range.

While seeded acres of pulses will undoubtedly decline this crop year, producers face a difficult decision with respect to pulse acres.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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