Opinion

Australian Red Lentil Production Decrease in 2019/2020

Australian red lentil yield decreased in 2019/2020 due to ongoing drought and bushfires. This combined with India's restriction on peas has increased prices and given way for other major exporters to fill in the gap.

Australian red lentil production is suffering in the 2019/2020 season due to continuous drought and the bushfires in late 2019. The country has endured 3 consecutive years of ongoing drought that has severely affected production volumes of lentils. This is recorded to be one of the worst Australian droughts and has proven to be extremely unfavorable for lentils, as the crop requires more moisture than other broadacre crops such as barley and wheat.

Lentil Production in Australia

The Australian lentil production has been rapidly increasing since 2016 and reached 750K tons in 2016-2017, significantly higher than previous levels of 219K tons. Yields are high, at 1.7 tonnes per hectare. In 2019, however, production decreased by 50% to only 373K tons due to extreme drought.

Red Lentil Prices on the Rise

The prices of red lentils rose from about USD 44.1 per kg in late 2019 to as high as USD 53 per kg in January 2020. The price of green lentils overall, however, remains relatively steady since 2019. The fires started in September of 2019 and have affected much of southern and eastern Australia including Victoria and New South Wales, where most of the red and green lentils are grown due to abundant winter rainfall.

The shortage and consequent price increase are set to influence the global lentil market this season as Australia is one of the top lentil exporters (3rd in 2018) in the world. Lentils are high-value crops that were first commercially grown in Australia during the 1990s. High-value crops are non-staple crops that have a bigger production return per hectare of land than other largely produced crops and thus result in bigger investment returns.

Price Effects on the Global Market

The Australian lentil shortage has directly affected global prices in January 2020. Although Canadian producers, which are the biggest lentil producers in the world, have not seen a particular decrease this season, red lentils of the coarse variety saw a price increase in Bangladesh, of both Canadian and Australian imports. Bangladesh is Australia’s biggest importer and Canada’s fourth-largest importer. The price of Australian and Canadian coarse variety lentils increased by BDT 5 (USD 0.059) at BDT 65 to 70 (USD 0.77 to 0.82) per kg.

Indian Restrictions on Peas to Affect Lentil Exporters

Furthermore, a recent Indian restriction on peas is also expected to further influence global exports and prices, including Australian suppliers. After the Indian government announced in December that it will restrict the import of peas until March, demand for red lentils, as a substitute pulse crop, increased. This resulted in a price increase of USD 0.55 per kg at the start of 2020.

As India is the world’s largest importer of lentils, this could be advantageous especially for Myanmarese suppliers who are the biggest pulse exporters to India. Bangladesh suppliers are also expected to be on the lookout as exports to India have risen 2.5 times from last year, although experts speculate this number comes from illegal re-exports to the country. The United States as the fourth-largest lentil exporter to India and the fifth-largest exporter in the world might also benefit from the restrictions.

Canada, as the second-biggest exporter to the Indian market, however, still remains the strongest candidate to fill the niche market gap. Canada exports nearly four times more in terms of quantity worldwide than Australia and its number one exporter status is currently unmatched. With the lentil shortage this season, Australia will unfortunately not be able to fully seize this opportunity coming from increased demand in India. Moreover, the country will have to compete with other top exporters, such as Canada, that have not seen massive production declines to keep its place amongst larger importers.

Sources

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