Canada Markets

India Struggles to Contain Runaway Pulse Prices

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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This chart highlights the 18-month price trend for two pulses which are reported in India's Weekly Bulletin on Retail Prices of Essential Commodities in one of many markets, measured in local currency. (1 Indian Rupee equals .015281 U.S. dollar or .02 Canadian dollars). Most markets failed to report as of Oct. 30, or showed steady to modestly lower prices. (DTN graphic by Nick Scalise)

The Indian government remains in damage-control mode trying to rein in the runaway prices of pulses; media reports have viewed this as a crisis. Planting of the winter Rabi crop has begun and the current moisture situation is raising alarms.

India's 2014/15 production of pulses was reported at 17.2 million metric tons, more than 2 mmt below the 19.5 mmt target and below the 19.25 mmt produced in 2013/14. This was largely due to dry conditions last crop year while quality was negatively affected with late-season rains in the winter Rabi crop.

Given this situation, prices of many pulses consumed in India have hit record highs this month after more than doubling in price in the past year. This is in a country where the price of staples such as onions or pulses can become a major political issue and lead to instability among the population. Lots of fingers are being pointed, with pulse prices rallying while global markets for grains and oilseeds are under pressure and India sits on significant stockpiles of crops such wheat and rice.

"If Saskatchewan with less than a million population and cultivated farmland area of nearly 19 million hectares accounts for 65% of the world's lentil exports and 54% of the world's pea exports, why can't we as an agrarian economy feed ourselves?" asked Binu Alex, co-founder and editorial director of commodityonline.com in an interview on the current situation.

Prices for certain pulses have exceeded 200 Rupees/kg in recent weeks, which reflects $3.06/kg U.S. or $4.00/kg CAD at today's exchange rate. Optimism surrounding a start to Rabi (winter crop) planting and a number of measures undertaken by the government is suggested to have cooled markets.

The government has conducted numerous raids on hoarders or speculators of product in the past week. Recent press reports are reporting a total of 9,304 raids and a volume of 120,907.9 metric tons confiscated a volume which seems to be growing by the day and are to be released into domestic market channels.

Local government initiatives have included stock limits which are imposed on traders, processors, retailers and those involved with the import/export trade. This limit has been set at 350 metric tons and of course, the Law of Unintended Consequences does apply. The Port of Mumbai handles 50% of the country's imports of pulses, with 2.5 mmt of product booked to unload between October and January. With 50,000 mt vessels on the books for some importers, the stocks limit prevents handling of such volumes. A Reuters report indicated that 1) vessels may be diverted to alternative ports or 2) purchases may be canceled unless the limits are relaxed, adding further to the shortages faced. Reuters reported that 250,000 mt is backed up in the port, while it remains to be seen if this situation will affect Canadian exports and Prairies markets.

The region of Maharashtra, which produces between 30 to 35% of the country's production, has also gone as far as providing free seed and fertilizer to producers willing to grow pulse crops or oilseeds as an incentive to expand production.

As of Oct. 23, planting of the winter Rabi crop was reported at nearly 2.4 million acres, 7% ahead of last year's pace. Market reports embraced this news as a factor which also helped to cool overheated markets. This pace has slowed as of Oct. 30 data, which shows 5.1 million acres planted, which is 3% below last year's pace, as producers slow planting while waiting for moisture. With close to 70% of the annual pulse crop produced in the winter Rabi crop, including chickpeas and lentils, this becomes a key crop to watch.

The current pace of planting comes despite extremely dry conditions, with the country's October moisture reported by government weather agencies to be 48% below normal as of Oct. 30. Of the 36 regions reporting, nine are rated as moisture deficient (20% to 59% below normal) and 20 are reported as scanty (60% to 99% below normal). This will have a negative impact on the summer crop as well as the pace of planting and establishment of the winter crop.

Commodityonline.com reports that water reservoirs are also lacking water, with an Oct. 21 report stating the country's 91 major reservoirs are at 58% of capacity, down from 77% last year and the 10-year average of 76%.

The attached chart shows the 18-month trend in two pulse crops which are included in the weekly Bulletin on Retail Prices of Essential Commodities report. The Nation Capital Region (Delhi) is just one of 16 markets which report weekly data. While media and government reports prices are retreating from their highs, most regions or markets failed to report this week, while the markets that did report showed steady to slightly lower retail prices.

India imported an average of 3.56 mmt of pulses annually between 2010 and 2014, 4.58 mmt in 2014/.5 while some suggest 2015/16 imports could be as high as 5.5 mmt.

Week 12 Canadian Grain Commission data released Friday shows bulk pea exports through licensed Canadian facilities at 1.135 mmt as of Oct. 25, up 16% from last year's aggressive pace of movement.


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

Follow Cliff Jamieson on Twitter @CliffJamieson

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