WESTERN PRODUCER — Canada’s red lentil prices need to fall to be competitive with Australian product, says a Canadian exporter.
Australian red lentils are selling for about US$650 per tonne C&F, which is about $50 to $60 per tonne cheaper than Canadian lentils.
Rav Kapoor, chief executive officer of ETG Commodities, believes Canadian grower prices need to fall to about 30 cents per pound to be competitive with Australian product and stimulate demand from India.
India could be in the market for a whopping 900,000 tonnes of lentils in 2023 if the price is right.
The country recently extended its lentil import duty exemption for another year.
The exemption was set to expire on March 31, which would have meant a return to a prohibitive 30 percent duty.
The zero percent import duty has now been extended through March 31, 2024, for every market except the United States, which must pay a 10 percent tax.
The extension of the exemption is surprising given that farmers are on pace to plant 4.56 million acres of the crop, an eight percent increase over last year.
Stat Publishing is forecasting 1.46 million tonnes of production, which would be the third largest crop in history.
Kapoor believes the Government of India took this step to help combat food price inflation.
“They want to make sure that there are ample supplies available and they want to give the market a clear direction without any uncertainty,” he said.
He thinks the government wants to keep both lentil and pigeon pea prices in check. India’s pigeon pea crop was disappointing. Imported lentils can be used as a substitute for pigeon peas.
Gaurav Jain, analyst with AgPulse Analytica, said the extension of the lentil import duty exemption is a step in the right direction.
In the past, India has tended to make short-term policy decisions and often flip-flopped on decisions, so the stability is welcome.
He noted that a free trade agreement between India and Australia was implemented on Dec. 29, 2022. That deal keeps the duty on Australian lentil imports at zero.
“So, it makes sense to keep duty from other origins also at zero,” he said in an email.
Australian farmers harvested a monster crop of 1.05 million tonnes of lentils, according to the official government estimate.
That is expected to provide stiff competition for Canadian farmers into the Indian Subcontinent.
Kapoor said Australia will likely be the dominant player in world lentil markets for the next three to five months.
Australian farmers need to move product straight off the combine because they don’t have much storage.
“That’s why you don’t see a lot of movement in the Canadian market,” he said.
If Canadian prices fall, India could buy 900,000 tonnes of lentils from around the world in 2023, although 200,000 to 300,000 tonnes of that would be new crop sales from Canada in the post-September period.
He estimated there are 2.1 million tonnes of lentils available for export as the new year begins, with supplies split evenly between Canada and Australia.
The problem is there are significant currency issues in Bangladesh, Pakistan and Sri Lanka.
“They are going through quite a difficult time on the import side,” he said.
India’s strong potential import program likely won’t be enough to offset the woes of the other countries in that region.
AgPulse is anticipating 1.43 million tonnes of Indian lentil production. Domestic consumption is nearly 2.5 million tonnes per year.
It is forecasting 690,000 tonnes of Indian lentil imports for the 2022-23 crop year, which ends on March 31, 2023. Another 600,000 tonnes are projected to be imported in 2023-24.
Jain isn’t as pessimistic about the demand outlook for other countries in the Indian subcontinent, although he did acknowledge that purchases in Pakistan and Bangladesh could be hindered by foreign exchange issues.
AgPulse believes there should be plenty of global demand for both Canadian and Australian lentils.
India has been Canada’s top market for the first four months of the 2022-23 campaign, purchasing 215,487 tonnes of the commodity. Turkey is the next biggest buyer at 195,808 tonnes.
Contact sean.pratt@producer.com
