WINNIPEG/MUMBAI (Reuters) - India’s decision to impose a steep tariff on pea imports could jeopardize $1 billion worth of pulse trading with Canada, which may cause farmers there to trim their pea acreage by nearly one-third.
Earlier this month, India imposed a 50 percent import tax on peas, as pulse prices fell below their government-set support levels because of record output.
The duty is expected to lift domestic pulse prices and spur farmers in India, the world’s biggest buyer of pulses, to boost pulse plantings, reducing import requirements in 2018.
Pulses, a cheap source of protein, are a staple part of the Indian diet. Canada is the world’s top pulse crop exporter. The short-term move to lift Indian market prices could impact India’s long-term food security needs, Canada’s International Trade Minister François Champagne said in an interview last week.
The tariff on peas and fears that India may impose a similar hike on red lentils could curb spring plantings in Canada of both crops by 30 percent and 35 percent respectively, said Marlene Boersch, a partner at Mercantile Consulting Venture.
The seeded area for dry peas in Canada for the 2016/2017 crop year, from August to July, is forecast to be 1.72 million hectares (4.3 million acres), according to data published by the Department of Agriculture and Agri-Food.
Canadian yellow pea prices have slumped since India’s tariff announcement to between C$5.50 ($4.31) and C$6 ($4.70) per bushel from between C$7.50 and C$8, according to LeftField Commodity Research.
Canada wants the import duty removed, but New Delhi is committed to doubling Indian farmers’ incomes and reducing imports, a senior official with India’s Ministry of Commerce and Industry said.
“Imports are not viable after adding the duty. Shipments will fall significantly in coming months,” said Pravin Dongre, chairman of the India Pulses and Grains Association.
Much of the land that Canadian farmers previously planted with peas is likely to be sown this spring with wheat, canola and soybeans, said Chris Beckman, oilseed analyst at Canada’s Agriculture Department. The tariff is unlikely to halt all pea trade with India, but it will sharply reduce imports, said Anurag Tulshan, managing director of Indian crop brokerage Esarco Exim Pvt Ltd, adding that it will remain in place at least until the size of India’s winter harvest is known.
AGT Food and Ingredients, Canada’s biggest pulse crop processor and exporter, posted its worst quarter in five years this month due to Indian oversupply, according to Canadian bank BMO. Its stock fell to a more than three-year low two days after India’s tariff announcement.
Reporting by Rajendra Jadhav in MUMBAI and Rod Nickel in WINNIPEG; Additional reporting by Euan Rocha in MUMBAI and Rupam Jain in NEW DELHI; Editing by Christian Schmollinger