Grain Snippet: Duties Hit Lentils Early
The Australian lentil market is struggling under the weight of the import tariff imposed early by the Indian government. Originally the duty exemption for lentils was due to expire on 31st March 2025, but this was brought forward to 8th March. The rate has been set at 11%, composing of 5% basic customs, 5% Agri CESS and 1% tax. The exemption expiry is a consequence of larger y/y Indian domestic production coupled with larger combined lentil supplies from Canada, Australia and Russia. Furthermore, as part of the pulse complex in India, yellow pea and desi chickpea imports are expected to be higher than average at a lower relative cost and substitute for lentils.
Unfortunately for the lentil market, India extended the duty exemption on yellow pea imports until 31st May 2025. Yellow peas are subsequently expected to remain a more attractive commodity through the period of Ramadan. As of 2024 India’s yellow pea imports have predominantly been sourced from Canada and Russia. Russia has ramped up its pea production in the last couple of years, and Canada has been hit by a 100% duty on yellow peas by China, historically the largest importer of Canadian peas. This infers that whilst India remains duty-free on yellow peas, Canadian sellers could front-end their program to capitalise on the opportunity in the absence of China. This shift in the pulse trade dynamics could limit upside potential for lentils.
The caveat to the issues posed by the return of lentil import duties is the existing trade agreement (ECTA) between Australia and India. The agreement ensures importers can apply (first in first served) to get only 50% of the prevailing duty for up to a total of 150kMT lentils per calendar year. How the total tonnes are divvied up means the ECTA should be sufficient to limit the impact of duties for up to 75kMT of lentil exports to India between April-June inclusive.
Lentil prices in each SA and Vic had already slid in anticipation of the duty announcement, alongside the fact that many of the bulk vessels had already departed Aussie shores, with exporters shifting attention toward cereals. SA mid-north bids for nipper-type lentils sit at circa $865/MT, down $25/MT from a month ago and $85/MT lower than the January highs. In the Vic Wimmera, nipper lentil bids are similarly down $25/MT compared to a month ago at $825/MT, and down $75/MT since Jan; meanwhile delivered Melbourne bids for nippers has only declined $40/MT from the Jan highs with a bulk vessel still on the stem for accumulation.
Although lentil prices have slid, the shift in China’s pea demand away from Canada has resulted in a surge in Aussie pea demand. Pea prices have accordingly lifted $45/MT over the first half of March. Supplies of Aussie peas left in grower hands are limited, so pea price support is anticipated to linger until Chinese demand is met.
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