Grain Snippet: Lentil Import Duties Under Review
Lentil prices across South Australia and Victoria have dipped though early Feb, now priced just below $900/MT on a delivered-port basis or equivalent. With many of the bulk vessels finalising near-term accumulation, the market has broadly come into alignment with the containerised market where shipping costs (per tonne) are more expensive. Buyer depth in the Aussie lentil market has also waned due to some recent comments from India’s Food Minister which alluded to an upcoming review of import duties by the Indian government.
For some time now, lentils have been exempted from India’s import duties, but this exemption is due to expire on 31st March 2025. The timing of this is no coincidence, as it directly follows India’s Rabi crop harvest, where domestic supplies of desi chickpeas and lentils hit local markets. Despite some local dry patches in key Indian pulse-growing areas, this season’s Rabi crop has seen above-average soil moisture. This year’s lentil production is currently forecast to come in above average; harvest normally commences from late Feb and continues through to early April.
With the upcoming harvest, the Indian government is concerned about the impact of imported pulses negatively impacting domestic farmers’ earnings. It is important to note that India consumes more pulses than any other country in the world and its government has held an ongoing goal of self-sustainability. However, consecutive years of poor domestic production of pigeon peas have led to increased imports to combat high food-price inflation. To that end, India has increased its imports of other pulses such as yellow peas, desi chickpeas and lentils. In recent years, however, the major exporter of lentils, Canada, has experienced drought and much tighter supplies. This changed in the 24/25 season where there was a rebound in Canada’s lentil production (up 35% y/y at 2.4MMT), coupled with significant increases in lentil supply from Australia. Although Bangladesh has historically been Australia’s largest importer of lentils, India became the biggest destination in each 22/23, 23/24 and for 24/25 to-date.
Indian import duty exemptions have persisted for each pigeon peas, yellow peas, desi chickpeas and lentils. However, following large volumes of imports, the outlook of improved domestic production and a significant decline in prices (particularly for chickpeas), there is now an expectation from the market that several of these duties will be reimposed over the coming months. Until such time as a decision is made on the extent of the duty, many Aussie lentil exporters are happy to sit on the sidelines.
Under the Australia-India Economic Cooperation and Trade Agreement (ECTA), Australia will be subject to only 50% of any prevailing duty on lentils up to an annual quota of 150kMT. This quota is divided quarterly, in each calendar year with applications assessed on a first-come, first-served basis. Any unused quota is carried into the consecutive quarter. Subsequently, the ECTA will provide some relief for exporters.
Nevertheless, any reimposition of lentil import duties in India will negatively impact Aussie lentil prices. It is unfortunate timing that this potential change coincides with a change in momentum for the Aussie dollar. Since October, the hefty decline in the Aussie has supported local lentil prices by up to $100/MT. At the time of writing the Aussie dollar has formed a short-term uptrend and is expected to limit further upside for the lentil market in the near term.
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