Opinion

Red lentil global market update

Published Feb 19, 2021
For the red lentil industry, the big question remains what will happen in India, the world’s largest importer of the crop. The country has switched from a 30% to 10% import tariff in 2018 and then in 2019 went back to its original restrictions creating a big uncertainty for the main suppliers. With a decreasing production outlet in the last years, India and Turkey haven't been able to meet their self-sufficient strategy, causing global price fluctuation and an inconsistent market dynamic.

India is aiming for self-sufficiency in pulse production as part of a mandate to double farmers’ income by 2022

As India strives to meet its domestic policy goals of increased production and consumption of pulses, in the 2016-2017 crop year, the country began imposing trade restrictions, both tariffs and quantitative restrictions on peas and lentils. As a result, Canadian pulse exports to India decreased by more than 80% during the 2017-2018 crop year.

India generally fluctuates its import taxes on lentils and other crops to ensure enough supplies for domestic use and to keep food prices affordable. The country has done so periodically since 2017, in which the case for red lentils has brought major instability to the industry as producers and suppliers need predictability. Red lentil prices have reflected as well on the Indian tariff situation causing fluctuations throughout these years.

Source: ITC Trade Map

Indian lentils imports have gone from USD 930 million in 2015 to USD 92 million in 2018 due to the tariff restrictions. By 2019, the Indian government announced a second reduction of the tariff in June, so the lentil imports had half of the year to recover, reaching USD 347 million.

Strong red lentil demand from Turkey supports market

In Turkey, customs duty on lentils was reduced from 19.3 percent to 9 percent in November 2020. The Turkish government claims the decision was taken in order to reduce the rising prices in the domestic market and lower food inflation. Truth be told, this measure responded to the decreasing production output of the country in the past years.

In 2020, Turkish farmers estimated that they harvested about 250,000 tonnes, well below the 300,000 tonnes grown in 2017, which was considered a good production year, but even lower from the official government forecast of 392,146 tonnes. 2020 was the third year in a row of disappointing production for the country.

According to Stat Publishing, Turkey imported 380,000 tonnes of lentils in the first seven months of 2020 compared to 350,000 tonnes for all of 2019, this increase in imports directly responded to the poor production output in the country.

For this reason, Turkey, unlike India, increased its lentil imports in 2020 for a total of USD 311 million from USD 140 million in 2019, a considerable 45% increase within a year. This increase comes mainly from Canada, Turkey's main supplier, which went from having a 60% import market share in 2019 to 80% of the share in 2020, representing a USD 262 million trade flow. Canada is followed by Kazakhstan with 7% of the share.

Source: ITC Trade Map

Turkey is also a lentil exporter. While processing the lentils bought from Canada and Kazakhstan, consuming some of them in the domestic market, it also packs some of them and exports it to countries such as Iraq, Sudan, Germany, and Egypt. Its annual export value in 2020 was USD 305 million, having a considerable increase in its exports from 2019 which was USD 163 million.

Canada still leads the global market share

Canada exported more than two million tons of lentils in 2019, with more than a quarter of the total volume going to India. Despite ongoing restrictions from India Canada had a fairly good 2019 in terms of lentil exports, with an export value of USD 903 million a 7% increase from 2018.

After India, Canada’s top lentil buyers are the United Arab Emirates representing 9.7% of the exports, Turkey with 8.2%, and Bangladesh with 7.9%.

Turkey and Australia are Canada’s top competitors in red lentil exports, followed by Eastern European nations. Australia which has the biggest export growth in recent years has positioned itself as the second-largest supplier of lentils with 12% of the export share behind Canada that leads the global export share with 50% of the exports. Turkey currently has 9.2% of the share with its re-export industry, followed by the U.S. with 7%.

Market Outlook

National Agricultural Cooperative Marketing Federation of India (NAFED), is forecasting that India will be self-sufficient in red lentil production as soon as 2021-22. The country has made huge strides in pulse production with 23.2 million tonnes harvested in 2020 compared to 16.3 million tonnes four years ago. The country has averaged 1.25 million tonnes of production in the last five years, which falls well short of the 1.9 to two million tonnes of annual consumption.

For this reason, the NAFED estimates India will import 1.05 million tonnes of red lentils in 2020-21, which is 750,000 tonnes more than in 2020. This means that the Indian market will remain steady for suppliers but will need to work along with new restrictions and tariffs.

As for Canada, the 2025 strategy aims to move 25% of the country’s pulse production into new and diversified markets, including food, pet food, and processing. As it is dangerous to be overly reliant on markets like India and China.

The Canadian industry is also working hard to keep global doors open for Canadian lentils and exports remain positive that despite ongoing restrictions from India, Canada’s lentil exports will remain steady or increase.

Sources:

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