Over the past couple of months, we’ve been reporting on how India is scrambling to deal with the local pulse production glut. Back in April, we explicitly summarized the main developments on the Indian front as related to peas.
More recently, the May 27th GrainCents Weekly Peas Digest reported that India was going to implement an import quota licensing system that would allow only 100,000 tonnes of yellow and green peas imports, as well as other peas varieties such as the dun variety. We need to stress that all of these varieties fall under the same export/import (HS) code.
One analyst’s view is that this latest action of the Indian government opens up the possibility of a formal trade challenge against its treatment of these peas varieties. It is well known that yellow, green, and dun peas are not recognized as identical goods in not only the Indian markets but also the international markets too. This analyst argues that due to their distinctive name and quality characteristics, there is no substitution between them. Therefore, such an argument opens up the door to legally challenge this import quota.
On the supply side of the Indian pulse balance sheet, the same analyst forecasts that Indian pulse acres in the upcoming 2018 Kharif season (July to October) will decline by anywhere between 2.9 to 3.7 million acres. Thus, this means lower production! The Indian government is recognizing this as the Ministry of Agriculture says that total pulse crop output from this year’s Kharif season will drop by 600,000 tonnes, or about 6% year-over-year, to 9 million tonnes.
However, the analyst says that this target won’t be reached, despite even the assumption of normal weather conditions. In his view, the output is poised to fall closer to the 8 million-tonne mark, as shown on the chart. He stressed that progress of monsoons, as well as planting in the coming months, are two important factors to watch going forward.
On the demand side, there is a rebound expected in India over the next few months. Local celebrations such as the Ramadan, occurring from mid-May through mid-June, followed by a series of Hindu festivals from August to October, are expected to enhance the consumption of pulses. Thus, heading towards September, pulse supplies are likely to tighten up. Such scenario opens the possibility of the import tax being removed, and more international peas imports.
Ultimately, even though India is seeing an early start to the monsoon season, the lower production and high demand expectations are a bit bullish.