India imposing 50% import duty on peas – unprecedented yellow pea price decline
Late last week, as the trade expected, in a move to support domestic prices after a bumper crop, India’s government announced a 50% import duty on peas. Effective from 9 November 2017, the import duty on green and yellow peas has increased from 0% to 50%. The duty will remain in place until changed or rescinded by the government. Any cargoes destined to India, but which have not arrived will be subject to the import duty.
For yellow peas, this change is devastating. Brokers in India suggest that if possible, vessels be diverted to other destinations such as China, Pakistan or Bangladesh. Until those peas have been cleared, Indian demand for peas from any origin will absent. The international field pea markets were in free fall at the end of last week, losing an unprecedented amount of value. Prices paid to Canadian farmers for No 2s, or better whole yellow peas posted their largest week over week change in the history of the crop, sinking CDN $2 per bushel or AUD $76 per metric ton (MT). Furthermore, Russia and the Ukraine have boosted production based on demand from India. Those countries will now compete more aggressively for outstanding demand elsewhere.
After the announcement, there were further news reports on imposing import duty on lentils at 25%, and potential on desi chickpeas as well. The international lentils markets reacted by selling off stock, resulting in a weakening of prices in the past week. However, it’s worth noting that there is no official announcement that there are plans for India to raise the import duty on lentils or impose quotas as it did with pigeon peas, mung beans and black mapte beans, yet.
Australian chickpea markets were in a nervous mood after the announcement. Fear that India will take steps to impede imports of other pulses is deepest in desi markets because the Indian subcontinent is the primary destination. During Australia’s 2016-17 and 2015-16 marketing years, 63% of all chickpea exports went to India, compared to 36% in 2014-15 and 40% in 2013-14.
Australian production will be down from last year’s record chickpea crop and the country needs to be able to move a substantial share of the crop to India to avoid a burdensome and price destructive surplus. Given market concerns, it would not be surprising to see exporters push hard to move the maximum quantity possible to India before the end of the calendar year.
The decision to apply duties to field peas reminded the lentil and chickpea markets that supply fundamentals will make it harder to defend prices. The problem is that for every month of diminished exports, available supplies relative to prospective demand grows. While it is impossible to predict what the Indian government will do, the industry should be prepared to react on any further (sudden) policy changes.