Lentil exports slowing down as India ends temporary tariff reduction

Canadian lentils headed to India are once again facing a steep import tariff after a short reprieve that saw plenty shipped into the massive South Asian market this summer.

India’s import levy on lentils from all countries except the U.S. has reverted to 30 per cent, plus a 10 per cent tax on that amount — effectively 33 per cent — as of September 1, 2020 following a temporary reduction to 11 per cent (10 per cent plus 10 per cent of that) in early June. The tariff on U.S. lentils remains higher, and has been bumped back up to an effective rate of 55 per cent, following a decrease to 33 per cent in June — the higher rate stemming from retaliatory action against U.S. steel and aluminum tariffs.

The Indian government had indicated in June that the temporary reduction would only apply until August 31, so the rate increase as of September 1 doesn’t come as a complete surprise to exporters.

“While we were hopeful that the reduced tariff rate would be extended, Pulse Canada will continue to engage with (Agriculture and International Trade) Ministers Bibeau and Ng, and our global counterparts, to develop clear, long-term, predictable rules and access for trade in peas, lentils and chickpeas with India,” says Greg Cherewyk, president of Pulse Canada, adding, “Canadian farmers and exporters need predictability, and that is a primary focus in terms of our relationship with India.”

Lentil shipments to India were due for decrease after strong exports through the summer months, but the higher tariff will intensify the slowdown, says Chuck Penner of LeftField Commodity Research.

“They bought so many lentils in the last few months, there was going to be a slowdown regardless,” he says.

Red lentil bids on the prairies have already moved lower, notes Penner, as the reduced demand from India combined with higher red lentil acres this year means supplies likely won’t be as tight as in the green lentil market.

Some exporters are also holding back on bids with the hope that India will drop the tariff back to 10 per cent in a few months, which Penner says would likely depend on how the rabi season shapes up, with planting starting in November.

Using satellite imagery from the end of July, Statistics Canada released a crop report earlier this week that projected 2.8 million tonnes of lentils will be harvested in Canada this year, with an average yield of 1489 lb/acre —  a 25 per cent increase versus 2019.

“I’m quite confident it will be a lower number — somewhere around 2.4 or 2.5 million,” says Penner, pointing to high disease pressure in the latter part of the growing season.

In addition to the steep lentil tariff, Canadian pea shipments headed to India still face a 50 per cent tariff — both of which have been in effect since late 2017.