MUMBAI, 14 Sep (Commoditiescontrol): On Friday, September 13th, the Indian government extended the duty-free import of yellow peas, which was expiring on 31st October, in order to control the rising chana price. This policy decision was unexpected, particularly as there was growing local demand to halt duty- free imports or impose tariffs on matar to protect domestic farmers. However, the government's attempt to control chana prices may not be very effective in achieving that goal, but it could negatively affect Rabi sowing of peas. We have analyzed the potential impact of extending duty-free pea imports.
Initially implemented to mitigate rising prices of pulses, particularly Tur and Chana, the government sanctioned duty-free imports of Matar on December 8, 2023. This policy temporarily stabilized prices for Tur and Chana. However, Matar is not a complete substitute for Chana or Masur, leading to a saturation in substitution demand and eventually stagnating Matar demand.
The domestic market experienced a surge in imports from Russia and Canada following the introduction of duty-free imports. As a result, chana prices plummeted, leading to a diversion of some chana and tur stocks towards matar. However, as previously noted, matar is not a perfect substitute for chana and tur, and after a certain point, the demand for substitution became stagnant. Nevertheless, the influx of imports continued in the domestic market, causing matar inventories to rise and prices to decline by approximately 50% from the season's high. Meanwhile, chana prices remained robust and are trading near the season's peak. This scenario underscores an oversupply of matar, which could be instrumental in moderating chana prices. The chart below illustrates the widening price spread between chana and matar, despite the increased matar supply.
The current market dynamic reflect underlying supply and demand factor which is a key to price discovery. It is essential to understand these factors as they will be guiding the future sowing trend of pulses, especially chana and matar. As per market grapevine, farmers are preferring Chana over matar due to better realisation the crop promises. Matar sowing activity will likely face a challenge, which could result from the governments decision of persisting with liberal import policy. Let us understand the supply/demand dynamics.
Supply Dynamics
The global exportable surplus of yellow peas last season totaled approximately 50 lakh metric tons (MT), with Canada and Russia collectively accounting for 70% of this volume. The European Union, Turkey, Ukraine, and other nations comprised the remaining share.
Yellow peas global exportable surplus
Demand Insights
Global demand for yellow peas is estimated at 57 million metric tons (MT), with food consumption accounting for 60% and animal feed 40%. India is the largest consumer of food-grade yellow peas, absorbing 29% of the supply, followed by China at 26%, and Bangladesh at 14%. In the animal feed sector, China dominates with a 56% market share, trailed by the European Union at 34%.
Shifting Dynamics in Global Pea Trade
While China exhibits substantial demand for peas as human food, amounting to approximately 950,000 tons, its need for pea-based animal feed is decreasing. This shift is driven by the availability of cheaper soy meal alternatives, stemming from increased soybean crushing operations in China which offer a more cost-effective option than yellow peas. Concurrently, Bangladesh faces purchasing constraints due to foreign exchange limitations. Adding to the complexity, Canada has introduced anti-dumping measures against Chinese pea protein imports, while the U.S. has imposed steep duties reaching up to 626%. These regulatory changes are poised to significantly reduce Chinese import activities.
Export and Import Projections
Due to potential of declining imort from China Canada and Russia are poised to maximize its pea exports to India before 31st October, but as per trade experts this should not exceed 10 lakh tons.
Policy Implications and Market Reactions
The government's strategy to use increased supplies of matar (yellow pea) to mitigate rising chana (chickpea) prices is proving less effective, as substitution demand for matar stabilizes, highlighted by the expanding price disparity between the two commodities. Extending the duty-free import regime may have a limited effect on chana prices but could significantly depress matar prices. Additionally, this policy could negatively influence sowing decisions for matar in the upcoming Rabi season.
Projection of Matar Supply and Market Dynamics Through March 2025
India imported approximately 20.8 lakh metric tons (MT) of matar from January to August, augmented by an estimated domestic production of 10 lakh MT last season. This resulted in a total available supply of 30.8 lakh MT. With a monthly consumption pegged at 2.5 lakh MT, the total usage from January through August amounted to 20 lakh MT, leaving a surplus of 10.8 lakh MT at the end of August. India will require an additional 10 lakh MT (including demand during Ramadan) to meet the demand until March 2025, when the new matar crop begins to arrive in the domestic market. Should imports stay within 10 lakh MT up to December, any market decline should align closely with the landed cost of the new crop matar, currently priced at around Rs 3,400 per quintal.
If fresh imports up to December 31st significantly exceed 10 lakh tons, we may see a further decline in matar prices.
(By Commoditiescontrol Bureau; +91 98201 30172)
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