Risks in yellow pea exports for exporting countries

03-Dec-2024 02:19 PM

Risks in yellow pea exports for exporting countries
The risks to yellow pea exports for exporting countries, particularly Canada, are significant and multifaceted, largely driven by changes in Indian trade policies, the dynamics of local agricultural conditions, and shifts in global market trends. Here's a breakdown of the key risks and factors at play:

1. Dependence on India and China
India's Role: India has traditionally been a major importer of Canadian yellow peas, but its imposition of import duties in late 2017 created a significant disruption in trade. The removal of this duty in December 2023 brought some relief, but this is tied to the uncertain extension of the zero-duty deadline, which is set to expire on December 31, 2024.
China's Role: Post-2017, Canada has shifted some of its focus to China, but this is not a stable or long-term solution. The geopolitical landscape and market volatility in China make it an unreliable alternative to India in the long run.
2. Uncertainty Around India's Import Duty
The continued success of Canadian yellow pea exports depends heavily on whether India extends its zero-duty arrangement. If the duty is reinstated after December 2024, it would undermine Canada's yellow pea market, significantly affecting exports.
Market Reactions: The imposition of duty again could lead to Canadian peas being priced out of the Indian market, forcing exporters to find alternative markets or deal with lower prices.
3. Indian Agricultural Conditions
Rabi Crop Dynamics: India's decision on whether to impose duties on yellow peas is influenced by domestic agricultural conditions, particularly the Rabi crop. If Indian farmers prioritize wheat over pulses due to favorable wheat prices, pulse production may drop, increasing future import dependencies.
Wheat vs. Pulses: With wheat prices at record highs, it may be more attractive for Indian farmers to sow wheat rather than pulses like yellow peas, potentially reducing the domestic supply of pulses and increasing India’s reliance on imports in the future.
4. Overstocking Risks in India
India has already imported a significant amount of peas (24.36 lakh tonnes) since the duty removal in December 2023, and these stocks are equivalent to a full year’s consumption. With large stocks available at ports, the immediate demand for further imports may be low, which could lead to market stagnation and lower prices.
Risk of Duty Re-imposition: Given that stocks are already at high levels, there is a chance that India could impose new duties to curb imports and reduce the strain on its domestic markets.
5. Global Competition and Market Shifts
If India continues to restrict imports or reinstate duties, Canadian exporters will face significant competition from other global suppliers of yellow peas. Countries like Russia, the US, and Australia could take advantage of any disruption in the Canadian market.
Dependence on Specific Markets: Canada's over-reliance on India and China leaves it vulnerable to shifts in trade policies or local market dynamics in these regions. Diversifying export destinations could help mitigate these risks.
6. Long-Term Viability of Yellow Pea Exports
The risk of India closing its doors to yellow pea imports entirely (via import duties or changes in domestic policies) remains a critical vulnerability for Canada. The dependence on a small number of large markets (India and China) creates significant exposure to policy changes and market fluctuations in these countries.
Looking to the Future: If India imposes duties again in 2024 or beyond, Canada and other pea-exporting countries may face significant challenges in sustaining strong export volumes. Developing new markets and diversifying product offerings could help mitigate this risk.
In conclusion, while the yellow pea export market for Canada remains strong in the short term (2024/25), the risks of policy changes in India and shifts in local agricultural conditions make the long-term future uncertain. Canada's reliance on a few large markets, particularly India, and potential competition from other exporters create substantial risks that need to be managed carefully.