By John DePutter & Dave Milne – October 31, 2017
“The fact India has said it plans to self-sufficient in pulse production within two years doesn’t surprise Gordon Bacon. After all, the CEO of Pulse Canada has heard it before.”
– Syngenta website, Oct. 30, 2017.
What it means:
We share Bacon’s skepticism that India will eventually produce enough pulses of its own to negate the need for imports.
By now, we’ve probably all heard of the Indian government’s pronouncement last week that it intends to be entirely self-reliant in pulse production within two years.
In reality, it’s a goal India has had in one form or another for 27 years. It is not the first time this news has hit the presses.
We admittedly don’t know all the details, but much of the Indian government’s latest bold prediction seems largely based on the country’s 2016-17 record pulse production of 22.95 million tonnes, up sharply from 16.35 million a year earlier.
Weather a huge production factor
As all farmers know, record crops simply don’t happen every year. Weather is the single largest factor in determining crop output, and unless the Indian government has somehow figured out how to control the skies, banking on record crops every single year seems a risky strategy. It’s even riskier when one considers that 75% of India’s annual precipitation falls during the monsoon season, between June and September.
Add in the fact that around 92% of India’s pulse production is non-irrigated, and you have a crop that is as much exposed to weather vagaries as any other.
But there are other reasons for pause as well. Extension work in the country is described as “haphazard and disjointed,” and it seems that many old-school farmers in the countryside are still reluctant or can’t afford to embrace new technologies that might improve yields.
More pulses being eaten
There is some talk that Indian pulse disappearance, which the government estimates between 21 million and 23 million tonnes, is actually higher. And meanwhile, even as India’s leaders try to motivate farmers to produce that many pulses, there’s a good chance that the amount consumed actually grows too, meaning the goal posts to be self-sufficient keep moving farther away.
Remember, when a commodity or product is cheap more tends to be used. And today prices are certainly cheaper than they were in 2015 and 2016.
Bear market phase
The purpose of this article is not to downplay the negative impact of India’s import reductions. There is no doubt the country needs fewer peas and lentils from Canada, at this time. And there is no question that India’s declining demand could continue bearing down on prices for those two crops. It’s not unrealistic to be prepared for more in the current bear markets.
But an equally important – perhaps more important – message is this: Keep the news in perspective. India’s demand for Canadian pulses is not going to evaporate and never, ever return. The seemingly bearish news about India’s demand is actually just part and parcel of the current bearish phase of the price cycle.
Bearish news always accompanies low prices. Often, bear markets turn out to be bottoming when the news seems the most bearish.
As the largest importer of Canadian pulses, what happens in India has a major bearing on the prices farmers in this country receive for their crops. Keep on top of the price trends. And see our ideas on when to sell or not sell.
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