Trade Talk with Shyam Narsaria/
Myanmar’s changing pulses landscape

The big news in Myanmar’s pulses sector is a new long-term deal with India. Can you tell us a bit about this agreement and the impact you think it will have on local producers?

Yes, so both governments recently reached an agreement on India’s import of a few key pulses from Myanmar. India has agreed to import 250,000 metric tonnes (MT) of black matpe and 100,000 MT of pigeon peas. This will be on an annual basis, every financial year (which runs from April to March). 

To appreciate why this deal is so significant for Myanmar’s farmers, you need to look at the wider context. Because of its size and proximity, India is a critical export market for Myanmar. In recent years, however, India restricted the import of pulses, then later allowed them on a quota basis. This created a lot of uncertainty for Myanmar’s producers because they did not have a predictable export volume each year to their biggest market. They were dealing with the uncertainty of India’s domestic pulses production and import policy.

With this agreement, however, farmers can be sure that 250,000 MT of black matpe and 100,000 MT of pigeon peas will go to India. This means they can plan to send the rest of their output to other markets, like the UAE, Pakistan, Nepal and Malaysia. It is worth noting that the agreement covers the minimum import volume. Depending on domestic supply factors from year to year, India may import more from Myanmar. 

That’s a really clear summary. You mentioned that India is a major export market for Myanmar. Around 80 percent of black matpe and pigeon pea exports go to India. There is a push to diversify and export more to China. Can you tell us a bit about that strategy and how it’s going?

Yes, so as I was saying, India is a major export market for Myanmar but in recent years, there have been restrictions which have hurt Myanmar’s farmers. The new five-year deal will reduce that uncertainty but there is still a need to diversify. China is obviously another massive market but there is currently some misalignment between what Chinese importers want and what Myanmar produces.

Demand for green mung beans is high in China so Myanmar’s farmers are trying to increase production of this crop. But there is a trade-off. Farmers are producing less black matpe in order to cultivate more green mung beans. So this is what Myanmar’s diversification strategy looks like in practice. The country is making progress and market conditions are favourable. Demand from China is increasing. And, over the course of 2020, the price of mung beans increased by 8 percent to $743 per MT while black matpe declined by 10 percent to $555 per MT.

What about beyond China: which other markets could Myanmar tap into to help diversify its exports?

Well, for the last few years, Myanmar has also been trying to increase its exports to more countries in South Asia and the Far East, including Vietnam, Philippines, Malaysia, as well as Japan and Korea. Vietnam is a particularly interesting market because there are special trade arrangements between Vietnam and China which sometimes make it cheaper to export green mung beans to China through Vietnam.

What makes these markets attractive export destinations?  

Well, in my view, the most important factor is that these are more regular and predictable markets than India. They don’t have unpredictable import restrictions or quotas. But aside from that, they are also higher value markets. 

Exports to India — whether it be pigeon peas, black matpe or green mung beans — are sent as raw materials. Whereas exports to these other markets often include a process of cleaning, sizing and sorting ; sometimes they are handpicked products. This increases the price of the export and allows Myanmar to capture more value.  

Would you say that Myanmar is producing more processed pulses?  If so, what is driving that progress?

There has definitely been an increase in the production of processed pulses over the last few years. Five years ago, I’d say that processed pulses accounted for around 2 percent of total production. In the past year, that figure increased to around 5-6 percent. And within the next few years, I would expect it to reach up to 12 percent.

One of the main drivers of this trend has actually been India’s import restrictions. Several domestic processing facilities were built in recent years, in response to India’s policies. It also makes logistical and economic sense for Myanmar to do more processing. It has its own reliable supply of domestically-produced pulses; and selling processed pulses captures more value.

What are the key export markets for processed pulses?

This year, we have seen demand growth from the Middle East. Freight costs to these markets are much lower and more economical than other large markets, like the United States, Canada and Europe. Exports of processed pulses to these countries have fallen quite significantly this year. But some of the other destinations include Japan, Korea, China and Vietnam, as previously mentioned.

You mentioned how freight costs are influencing Myanmar’s exports. Could you talk a bit more about this? How has the global supply chain crisis affected the market?

The biggest challenge we face is freight costs. And it’s not just pulses but all of Myanmar’s commodity exports. Take a product like rice. It’s not a very high value product — per metric ton, you can expect to earn around $280 to $300 dollars. But freight costs — say, if we are exporting to Europe — are being quoted at $500 per metric ton. So you can see, it is completely unworkable at these prices and Myanmar is suffering. In particular, exports to Europe and America have been hit hard.

As we approach 2022, what is your outlook for the pulses sector in Myanmar?

For 2022, I expect India to be the most important factor shaping Myanmar’s pulses sector. As I’ve mentioned, the new agreement provides much-needed certainty: at least 350,000 MT of black matpe and pigeon peas. And I wouldn’t be surprised if we see even more demand. There has been extensive rain in India over August and September, which has caused a lot of damage, particularly to black matpe crops. So there will be shortages in the Indian market and Myanmar is well placed to take advantage. I think production and export volumes will increase — perhaps by as much as 20 percent — over the next year.