Canadian Analyst's Perspective of Indian Pulse Situation
By Brian Clancey STAT Publications
World pulse production should be little changed this year because of the record rabi season harvest now underway in India, but there remains a significant risk the output will decline in 2018.
Just as last year’s kharif season crop reduced demand for green lentils, this year’s increase in desi chickpea output should reduce demand for yellow peas, small kabuli chickpeas and desi type chickpeas during the last half of the calendar year.
Markets are paying close attention to whether India’s efforts to encourage continued expansion in pulse crop production will be as successful in the coming production cycle. The fact that commercial markets fell below the minimum support price (MSP) for tur or pigeon pea in several regions suggests farmers may prefer to grow other crops.
India’s production goal for all food grains for the coming cycle is little changed from this season’s. The 273 million metric ton target is up one million tons from the latest estimate for 2016-17. Even so, there is a growing belief pulse production will fall sharply.
Policies aimed at boosting pulse production in 2016-17 were effective. But, the follow up has been less so. Many farmers have sold much of their crop below the MSP, creating a disincentive to maintain output.
Imposing a 10% import duty on tur or pigeon pea was intended to boost prices paid to farmers but product from two of India’s key suppliers enters duty free under other trade agreements. Once the bulk of the desi chickpea crop starts to enter markets, there is a risk similar action could be taken with other pulses, including desi chickpeas from Australia and yellow peas from Canada and other origins.
Such moves would target new crop product from Australia and other suppliers, more so than pulses harvested last year. However, given that India is the most important destination for yellow peas and desi chickpeas, any increase in import duties are more likely to be shared between buyers and sellers, limiting the impact on landed costs.
While returns from pulses remain competitive with other crops, growers outside India appear to be somewhat concerned about the depth of demand in the coming season. Intended seedings of all dry pulses in Canada and the United States has dropped from 14.63 million acres last year to around 12.95 million. While dry edible bean and chickpea area is up, land in lentils and field peas is down. Lentil area could drop over one million acres to 5.44, while pea seedings could drop 500,000 acres to 5.16 million. If farmer stick with their intentions, average yields would see production drop from 12.33 to 10.56 million metric tons. However, because residual supplies are up sharply from last year, the available supply of pulses may only be down 257,000 metric tons at 13.27 million.
To the extent demand from India is muted during the last half of the calendar year, prices for pulses could trend lower through at least December. Price direction in 2018 will be determined in large measure by the extent to which lower prices increase demand from countries such as China and the impact they have on rabi seedings on the Indian subcontinent.
If those decline as expected, demand for pulses for arrival after December would be expected to improve, which could add important support to prices. This suggests prices could set their season lows for 2017-18 before November or December, and trend upward in 2018, depending on the pace of buying interest.