Tariff Spike in India Hits Chickpea Producers
Tariff Spike in India hits Chickpea Producers
The global chickpeas market is currently experiencing a steady growth. In 2016, global production volume of chickpea reached 12.1 million tonnes, up 9.6% from the previous year. Such growth was supported by favorable changes in the consumption pattern driven by; improved living standards in developing nations, changes in dietary patterns, increasing number of vegetarians, and heightening health awareness.
However, the recent global trade is facing uncertainties, as India, the top importer, increased its tariffs on desi type chickpeas to 60% this year. Such practice is set to affect desi type chickpea producers such as Australia. India will most likely maintain its import duty throughout most of 2018. With no signs of lifting such practice, concerns on oversupply are set to continue in the short-run.
Global Demand for Chickpea Remains Resilient
Chickpea is a cool season crop and is drought tolerant but frost sensitive. It can take anywhere from 90 to 100 days to grow them. They are usually harvested when most of the plants become yellow.
Featured: Desi Chickpeas
Featured: Kabuli Chickpeas
There are two types of chickpeas: desi and kabuli types. Desi chickpeas, darker in color, are served in a number of ways while kabuli chickpeas, bigger in size, are used in salads or to make flour. Desi consumption is primarily dominated by countries in the Middle East and Southeast Asia whereas kabuli is a global commodity, preferred by European, North American, and South African markets.
Chickpeas are known for its nutrients such as vitamin K, vitamin B-6, zinc, copper, magnesium and iron. It is also an excellent source of vegan and gluten-free protein. Because of their nutritive qualities, chickpeas are made into various products such as edibles and medicine. Although the majority are human-consumed, some are served as animal feed due to its high nutrient values.
A rise in vegetarianism has contributed significantly to chickpeas demand in recent years. Veganism in the U.S. alone increased by 600% since 2014, 6% of the population representing as vegan. Hummus consumption has been increasing by 5% annually for the past 10 years. Health benefits associated with chickpeas consumption and versatile applications make them a highly desirable commodity.
Global Chickpeas Production Sets a New Record
Source: Chickpea production data provided by Tridge
In 2016, India produced 7.8 million tonnes, accounting for 64.7% of global chickpeas production, up 6.7% from the previous year. Such increase in production is attributable to prolonged dry weather in India, encouraging farmers to plant more drought-tolerant plants such as chickpeas. As a Hindu majority state with the largest vegetarian population in the world, India heavily depends on pulses as its source of protein. For India, most of the productions are consumed domestically; where Desi variation is produced and consumed.
Australia was the second largest producer, representing 7.2% share. Approximately 90% of chickpeas produced in Australia are Desi variation, making Australia highly dependent on Asian consumption.
Although Canada represents less than 1% share in global production, it is notable that the nation has increased the production by 28% year-on-year. According to Agriculture Ministry, to meet global demand, Canada plans to grow 140,000 more hectares of chickpeas in 2018, which is expected to double the amount of production. Note that most of the chickpeas produced in Canada are Kabuli variation, making the market dependent on the U.S. and European countries.
Australia is Hit Hard by India’s Tax Increase
Source: Chickpea export data provided by Tridge
Australia is the largest exporter of chickpeas, accounting for 41.3% of global export as of 2016. As a producer of desi type, the nation exports 95% of the production to India. However, changes are expected as new tariff was put in a place by Indian government since December 2017. In April 2018, chickpea exports from Australia totalled to just over 70,000 tonnes, down 35% from the previous month. Such downward trends are to continue, as India recently announced another tariff increase in 2018. Pakistan and Bangladesh are currently only volume markets for Australia.
Source: Statistics Canada, Tridge
Canada, among the top five chickpeas exporters, suffered little to no impact from the Indian tax increase, as Canada grows kabuli type chickpeas. Main export country for Canadian production is the U.S., where kabuli chickpeas are preferred.
Canada accounted for 5.5% of global chickpea market, where the export increased by 10% year-on-year in 2016. The top export destination was the U.S., accounting for 71% of exports from Canada as of April 2018. In 2016, Canada stood as the largest exporter destined to the U.S. as Mexico, the competing country, experienced unfavorable weather conditions such as frosts, which affected the quality of harvested chickpeas.
Source: Chickpea import data provided by Tridge
India is the key player in global pulse trade. India imported 713 million tonnes of chickpeas, accounting for 32.3% of the global chickpeas market in 2016, followed by Pakistan (16.4%), Turkey (7.3%), Bangladesh (5.5%), and the United Arab Emirates (5.1%). Note that countries from Asia usually import desi type chickpeas, where the rest of the world import kabuli type chickpeas.
With unrestricted imports and overproduction of chickpeas, India struggled to manage its supply glut. Due to continued dry weather conditions in India, a great proportion of farmers turned to grow less water intense crops such as chickpeas, which led to a sudden increase in chickpeas production in India. In order to address the overflow of supply, the Indian government has actively sought to support the domestic supply by raising import tariffs on chickpeas. The practice was applied over three steps so far; 30% tariffs announced in December 2017, 40% tariffs announced in February 2018, and 60% announced in March 2018. Despite such government intervention, domestic chickpea price dropped further, as supply overflow continued from mass planting from the previous year and favorable weather conditions, creating uncertainties to global trade.
Although the U.S. only accounts for 2.6% of global chickpea imports, the nation is one of the major importers of kabuli chickpeas. Imports to U.S. grew 53.4% year-on-year in 2016, representing trends toward health-conscious eating, as well as demand for gluten-free products.
Market Condition Remains Unfavorable in the Short-Run
Source: Chickpea wholesale price provided by Tridge
In the global trend, continued upward trends in chickpea consumption is expected. Emerging countries are witnessing population growth and improved living standards. With trends towards healthy eating, consumers with improved financial standing are choosing quality and health over quantity. Various applications of chickpeas such as humus, a very popular spread, is proliferating the demand. The growth is further backed by increasing number of vegan worldwide, requiring alternative source of protein. All of these factors are contributing towards the global chickpeas market growth.
However, short-term uncertainties remain as India is not expected to lift its increased import tariffs within foreseeable future. The export market is getting more competitive as India drops out of the trade as one of the largest importers. With such lost in a global trade market, major chickpea exporters such as Australia, are left with large amounts of unimported desi type chickpeas.
Still, the market for Kabuli chickpeas, where most of the productions are destined to developed countries such as the U.S., is expected to grow with resilient demand. Kabuli exporters such as Canada is unaffected by the Indian tax policy and will, therefore, most likely keep up with its current rate of production and export activity.
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References
2. https://research.rabobank.com/