JUST as Santa was loading up his sleigh late last year, Australian pulse producers were given an early Christmas “present” that was far from their wish list: India announced the immediate application of a 30 per cent tariff on chickpea and lentil imports.
This added to the earlier tariff announcements of 50 per cent on field peas and an increase from 10 to 20 per cent on wheat in November, and quota restrictions announced for mung beans and pigeon peas in August.
All of these announcements were for immediate application, even to consignments already on the water.
Subsequent tumbling local pulse prices, particularly chickpea, and losses being realised for consignments already on the water prompted an Australian agriculture industry delegation to travel to India to meet with counterparts in January.
Led by the new Minister for Agriculture David Littleproud, the delegation was hoping to mitigate the impact of the tariffs, or at the very least negotiate a waiver for the cargo already on the water.
While none of these aims was achieved, it was encouraging that a commitment was made by the Indian government that in future, advance notice of tariff application would be provided, along with advice regarding stock levels.
That commitment was never going to meaningfully support prices back up, but it may have instilled a little confidence back to traders thinking about exporting to India into the future.
That however came to nought last week when the Indian chickpea tariff was lifted by 10 per cent to 40 per cent, effective overnight and with no notice.
This most recent chickpea tariff increase comes at the same time as more broad change in import duties has come into effect.
In the most recent Indian budget, an existing broadly-applied three per cent education levy on imports was replaced by a 10 per cent social welfare surcharge to be applied to most imports, including pulses, and was effective from the first day of this month.
This net change of seven per cent adds pain to already strained prices.
The context is clear.
The Indian market is amply supplied and domestic prices have been falling, elections are imminent in key pulse-growing states of India and, following a mild winter and closing of the winter frost window, the risks for the upcoming Rabi chickpea crop are decreasing and prospects look good.
Put simply, there are more than 260 million Indian “cultivators” and ‘“agricultural labourers” (many poverty stricken) facing low crop prices, but with valuable votes up for grabs.
Moreover, India lacks a broad-based domestic taxation system to fund social welfare, structural change and government investment.
The impact on Australian chickpea prices has been severe, though fortunately to date they remain above 2013-14 prices.
Additionally, given the relative price highs seen since mid-2015, a market re-balance was expected at some stage.
It’s hard to find signs of a meaningful uplift before the almost-certainly reduced Australian chickpea crop later this year.
Given the increased recognition of the agronomic value of pulse rotations in recent years, it will be of interest to all to see just how much reduction there is in chickpea planting in response to the lower price prospects.