Representatives of the pulse industry will ask the federal government to purchase excess pea and lentil stocks after India unexpectedly hiked its tariff on the crops.
The request is to reduce “burdensome” stocks from an unexpected market shock before the new crop year, said Tim McGreevy, chief executive officer for the USA Dry Pea and Lentil Council.
India was the largest export market for U.S. peas and lentils, purchasing 150,000 metric tons to 200,000 metric tons of dry peas and 60,000 to 90,000 metric tons of lentils each year in the last five years.
India represents about 25 to 30 percent of total pulse exports, McGreevy said.
In November, the Indian government imposed a 50 percent tariff on all dry peas imported by India. Then, in December, the Indian government imposed a 30 percent tariff on lentil and chickpea imports.
“What was particularly disturbing about this decree was they made it effective immediately,” McGreevy said. “That was very difficult, because some U.S. shippers had product on the water bound to be delivered into India by the end of the year, or was already loaded and shipped. That was what we considered to be quite poor trade practice.”
The shipments had to be redirected, causing some shippers to take losses, McGreevy said.
India is within its rights under the World Trade Organization to impose the tariff on imported pulses, McGreevy said.
The reason given is that India had a fairly large domestic crop of pulses and is protecting prices for its growers. McGreevy said it’s had the desired effect: The tariff completely shut off all sales into India, and domestic prices increased “significantly.”
India is the largest producer and “by far” the largest consumer of pulse crops in the world, McGreevy said. Eighty percent of India’s population is vegetarian and constantly seeks inexpensive sources of vegetable protein.
Stronger demand domestically has helped soften the blow for U.S. farmers, he said. But stock levels are well above the past five years. Prices have dropped by 2 to 3 cents per hundredweight since the tariffs were announced.
“It was the biggest market shock I’ve been a part of in my 24 years,” McGreevy said. “We’ve had droughts before, but you can kind of see them coming. But to have a shock like this where literally a government decision to cut off trade, after you’ve signed contracts — it was significant. There’s no way to plan for that (or) insure against that. There was no indication this was coming.”
Wheat, soybean and corn industries have faced a similar tariff in India, McGreevy said.
“This isn’t something other commodity groups haven’t faced — they have,” he said. “It’s just the first time we’ve faced it, because they’ve generally been pulse-deficit.”
India typically struggles to produce pulses domestically, due to weather, McGreevy said.
The U.S. industry has argued to the India government that the tariff doesn’t help their own food security in the long-term, McGreevy said. India’s consumers may respond negatively to the higher domestic prices.
Pea and lentil acreage is likely to drop because of the uncertainty, McGreevy said. If India has a short crop, the U.S. and Canada may not have enough product to ship them.
He believes India will eventually drop the tariff and re-enter the market, but likely not this year, McGreevy said.
“We have no idea, and it’s hard to predict,” he said.