Spotlight. Problematic times for pulses

In a strange development, at a time when India is harvesting a record pulse crop estimated at 22.1 million tonnes (kharif 8.7 million tonnes and rabi 13.4 million tonnes), Indian imports are also set to reach a new high of over 6.0 million tonnes (mt) during financial year 2016-17.

From April 2016 to January 2017, total arrivals of imported pulses were an estimated 5.4 mt; and going by the frenetic pace of arrivals to beat the March 31 proposed deadline to ensure cargoes are fumigated with methyl bromide at the origin rather than at the discharge port in India, the projected import for the whole year is set to exceed the 2015-16 high of 5.9 mt by about 10 per cent.

In other words, the aggregate availability of pulses in India (domestic production plus import) is a massive 28 million tonnes this year. Admittedly, Indian crop production data is compiled on a crop year basis (October-September), while imports are on a financial year basis. But that is not going to dramatically alter the availability picture.

On the ground, the impact of a big rebound in production combined with continuing largescale import is that farm-gate prices are ruling closer to the minimum support price for most pulses.

The tardy pace of procurement through the designated government agencies further exacerbates the downside price effect in many producing centres.

In 2016-17, growers planted record acreage in the hope of receiving remunerative prices after two years of below-normal rainfall and subdued harvests.

The collapse in the price of major pulses such as pigeon pea (tur/arhar) and chickpea (chana) in recent months is sure to belie the hopes of the growers and disillusion them. Policymakers have to guard against the risk of a decline in acreage in 2017-18 as a backlash to lack of adequate support in this year.

So, what’s in store for the pulses market in the coming months? Chickpea or chana is the country’s dominant pulse crop accounting for 40-50 per cent of aggregate pulse output. Harvest is on and the arrival of chana is slowly gathering momentum.

The government’s estimate of chana harvest is 9.1 mt although some sceptics say the crop size could be slightly lower at about 8.5 mt.

Currently chana prices are hovering in the ₹4,800-5,000/quintal region and the market is likely to come under pressure in the coming weeks when arrivals turn heavy. Australian chickpea imports (priced at an average of $800 a tonne) are also continuing. About 5,00,000 tonnes have been contracted for.

Tur : At about ₹4,300 a quintal, tur/arhar (pigeon pea) prices continue to rule below the MSP of ₹5,050 a quintal. If import duty is imposed, it will support the domestic market and help improve tur/arhar prices by 10 per cent to reach close to MSP.

Urad : At about ₹6,200 a quintal, urad price is well above MSP. Import duty, if levied, will lift urad price too.

Currently, there are two uncertainties for the market. One is the possibility of the government imposing an import duty (may be 10 per cent) on pulses so as to discourage large-scale imports that are seen depressing domestic prices.

The other is the non-tariff barrier in the form of compulsory methyl bromide fumigation at the origin (load port) instead of at destination (discharge port in India).

Countries like Canada and the US have banned methyl bromide fumigation; and so they will not be able to comply with Indian plant quarantine condition.

While this move by the government has created panic in the market, there are attempts to find a via media in the form of use of fumigant aluminium phosphide or phosphine as an alternative to methyl bromide. By its very nature, phosphine reacts slowly taking several days to exert its effect, unlike the rapidly acting methyl bromide.

Another key uncertainty for the market (both domestic and international) is also the early sign of a developing El Nino in South-East Asia. It may take up to two months to obtain a credible forecast of the status of the weather phenomenon.

By then, the government of India will have to be ready with an action plan to meet any contingency.

Otherwise, the euphoria of record crops may vanish without a trace.

The writer is an agribusiness and commodities market specialist