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THE WESTERN PRODUCER | WWW.PRODUCER.COM | NOVEMBER 15, 2012
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PULSES | EXPORTS
India’s pest problems may be boon for Canada Export opportunities for pulses | India revives pulse import subsidy to control food price inflation BY SEAN PRATT SASKATOON NEWSROOM
India’s faltering pigeon pea crop and its revamped pulse import subsidy could provide much-needed support to Canadian lentils and yellow peas, says an analyst. A story in India’s Business Standard said the countr y’s reliance on imported pulses will increase because of pest damage to the summer season pigeon pea crop. A veteran Indian pulse trader quoted in the article said pod borer has reduced yields by a minimum of 10 percent. Other reports peg the damage at far more than that. “They always have some pest problems. It seems to be much bigger this year. I’ve heard as high as 25 to 30 percent,” said Marlene Boersch, analyst with Mercantile Consulting Venture. “That’s why it surprised me that we haven’t seen a little more follow through on lentils.” Green lentils are a good substitute to pigeon peas, but Canada faces stiff competition in India from excess pigeon pea production in Myanmar and Africa. Boersch thinks Canadian lentils should be a good deal, but importers are hesitant to buy because they believe markets could be turning down. “I have little doubt in my mind that there are some shortfalls that they will one way or another have to address,” she said. “We really need some help with
India’s reliance on imported pulses will increase because of pest damage to their summer pigeon pea crops. | FILE PHOTO green lentils right now.” Alliance Grain Traders president Murad Al-Katib said there are differing views on the severity of the pest damage. However, what appears certain is that the poor start to the monsoon season caused significant produc-
tion problems for the summer crop. He said the Indian government has reduced its estimate of summer pulse production by one million tonnes. There are also lingering subsoil moisture concerns as the winter crop is seeded.
“We think that there will be a sustained demand event in India that will last through until March of the 2014 crop,” said Al-Katib. Another encouraging development for Canadian growers is that India has revived a pulse import subsidy that was in place between August 2008 and June 2012. According to an article in the Hindu Business Line, the government will subsidize imports of one million tonnes of pulses to be distributed in 2012-13 through India’s Public Distribution System (PDS). The subsidy has been doubled to $385 per tonne. The goal is to keep food price inflation in check following what is expected to be a disappointing kharif harvest. “I would expect that we might see some of these state buying agencies coming to the market and buying on that basis later in the year, which would be very, very supportive to us,” said Boersch. The Hindu Business Line article said states participating in the PDS program have shied away from Canadian yellow peas in favour of chickpeas, pigeon peas, black gram and green gram from Myanmar, Tanzania, Malawi and Australia. However, this year could be different because of a “paucity of surplus supplies” of products such as chickpeas in export markets. The subsidized price of yellow peas of $37 US per tonne could be lucrative given the open market price of $441 per tonne. Boersch said growers will likely
have to wait until winter for demand through the PDS system to materialize because importers are sitting on ample pea supplies. “They’ll be waiting to clear some of that out before they bring more material in,” she said. Earlier this month, India’s government said it was increasing minimum support prices for domestically produced rabi chickpeas and red lentils, while keeping barley and wheat support unchanged. “They are supporting the two key pulses to wean them off import dependence,” said Boersch. However, she doesn’t believe the seven percent increase in the chickpea subsidy and the 3.5 percent increase in red lentil support will be enough to convince growers to plant more pulses because of poor yields for those crops. “In spite of keeping wheat unchanged, it’s still the highest return per acre,” said the analyst. Boersch used five-year average yields to determine that chickpeas rank third in estimated returns, providing Indian farmers with threequarters of what they can get from wheat and rapeseed-mustard. Lentils are even worse, ranking fifth out of the six major rabi crops. “This (incentive) is not doing much, certainly not doing anything special to support pulses,” she said. Al-Katib said slumping lentil prices will lead to acreage contraction around the globe in 2012-13, but that will help lower the surplus.
USDA | CROP OUTLOOK
U.S. crop survived drought better than anyone expected MARKET WATCH
D’ARCE McMILLAN
USDA awaits proof of improving U.S. wheat export prospects
T
he United States Department of Agriculture might have deflated growing optimism that increased U.S. wheat exports, and perhaps stronger wheat prices, were just around the corner. The USDA’s monthly supply and demand reports released Nov. 9 were negative for wheat and oilseed prices. The USDA did not change U.S. wheat production, but it shaved its forecast of exports to 1.1 billion bushels down from 1.15 billion in the October report. U.S. wheat exports to date are slow and had been lagging the pace needed to reach the USDA’s export target, so the reduction in this month’s export target is based on experience. But a belief had been building among traders that with Black Sea
region exports expected to wind down in the coming weeks, U.S. exports would start to increase. Apparently the USDA will wait for evidence before hitching on to this bandwagon. The USDA also lowered its estimate of global wheat production by 1.62 million tonnes to 651.43 million tonnes. As expected, it cut its forecast of Australian production to 21 million tonnes, a reduction of two million due to dry growing conditions. It kept its outlook for Argentina at 11.5 million. Flooding there might cause that number to be reduced in later reports. The USDA also lowered its expectation of global consumption and the result was an increase in its forecast for ending stocks, which climbed to 174.18 million tonnes, up 1.18 million from October. That was not positive for a wheat rally. The latest USDA report made only minor revisions to its supply and demand estimates, but there was not much other news to trade on so it was closely watched. Soybeans and canola were already on a gradual downtrend on expectations of a bumper South American soybean crop and the USDA report punched values lower. The USDA did not change its soybean production forecasts for Brazil and Argentina. Significant rain final-
ly reached dry areas of Brazil last week, improving the prospects for a successful seeding season. Excessive rain in Argentina has raised the question of whether farmers there will be able to seed all the corn and soybean acres that are forecast. The bearish aspect of the USDA report was the increase in the U.S. soybean crop to 2.971 billion bu., a little more than the trade expectation of 2.892 billion bu. The USDA increased its forecast for crushing and exports but not enough
to prevent a slight increase in soybean ending stocks to 140 million bu., up from 130 million in the October report. The trade expected 131 million. The question now is: will the lower prices that flowed from the bearish U S D A re p o r t s p a rk i n c re a s e d demand? Since the peak on Sept. 4, soybeans are down 18 percent. Canola peaked Sept. 14 and since then is down about 10 percent. Farmers have generally enjoyed good cash flow and are in a strong
position to keep their bins closed until buyers offer the right combination of price and basis. Follow D’Arce McMillan on Twitter @darcemcmillan.
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