On June 2, India reduced the country's duty on lentil imports from 33% to 11% for imports from all suppliers, such as Canada and Australia, although this duty will remain at 30% for United States supplies. This move is indicated to least through the end of August.
Pulse Canada President Greg Cherewyk stated, in an article on Drumhelleronline.com, "What we know is that the Indian Ministry of Finance published a notification that stated that India's import duty on lentils from all origin, except the U.S., will be reduced from 30 to 10 percent. The challenge for us right now is that the wording in that notification isn't clear."
On June 8, the Economictimes.com reported that global prices have risen $100/metric ton to $670/mt in one day following the announcement. The piece stated that the recent rabi lentil harvest in India resulted in production that is 25% lower than last year, which is in conflict with the Indian government's May 15 Third Advance Estimate which estimates the rabi lentil crop at 1.44 million metric tons, up from 1.23 mmt produced in 2018-19.
The $100/mt USD in price reported equates to roughly $133.64/mt CAD at today's close in the spot dollar, which equates to a price move of $6/cwt or $0.06/pound.
Canada's stocks could be tested as a result. On May 7, Statistics Canada estimated March 31 stocks at 1.120 mmt, although this report came with warnings that the survey period was affected by the COVID-19 pandemic. Over the past three years, Statistics Canada data shows an average disappearance of 803,333 mt from March 31 through the end of the crop year on July 31, while this disappearance is calculated at 851,000 mt in 2018-19. This pace of disappearance would project forward to ending stocks of 269,000 mt to 316,700 mt, which is consistent with the current AAFC forecast of 300,000 mt. At the same time, the AAFC forecast was released on May 22, well in advance of India's move to reduce import duties.
Green lentils have yet to respond although the trend has been higher over the past two months. Saskatchewan Agriculture reported red lentils at $26.89/cwt delivered to Saskatchewan plants on June 3, while Statpub.com reports the red lentil bid at $29/cwt on June 8. This is the highest bid reported since December 2016.
The range of new-crop bids is also shown to widen over the past week. Large green bids are shown to range as high as 30 cents, up 1 cent over the past week, while the red lentil bid for new crop ranges as high as 28 cents, up 2 cents from last week's reports. The lack of carry in this market will provide little incentive to carry product out of the current crop year. This situation bears watching.
Cliff Jamieson can be reached at email@example.com
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