From one year to another, the attention to pulses is growing on behalf of high demand level, and the growth of population. However, implementation of the higher customs duty rates on pulses in India starting from November 2017 has changed the market situation, and brought some difficulties for trading activities. Thus, the key events and difficulties on the global and Russian pulses market became the main topic of our interview with the CEO of LLC Grainrus, Natalia Gorbunova.
- How can You characterize the results of the FH of the current season on the export market of peas and chickpeas?
2017/18 MY is and will stay further quite difficult both for the traders and the producers. During three previous years the high demand level was stipulated by El Niño and so stimulated the major producing countries i.g. Black Sea Region, Canada, Argentina, Australia to increase pulses production. However, El Niño, which almost destroyed the crops in India, was followed by La Niña and it make sense that the supply/demand balance is changing.
- What are the major features of the current season? How the short time prospects on the market of peas and chickpeas are going to change?
The analytics have been forecasting the price decline on peas and chickpeas during the current MY and expected the increase of pulses crops in India but there was no smooth price change due to the late planting.
Thus, the delay in harvest of chickpeas in Canada and Russia almost for a month led to the peak demand during September-October 2017 for kabuli which than was followed by the sharp decrease in prices.
After four-year long price rise, there was a logical but as usual unexpected turning point. The increase of the global pulses production together with favorable weather conditions in India have changed the trend and now we can observe the “bear rally”.
The tax increase on import of chickpeas in India placed in jeopardy the production of pulses in Australia, because many farmers there will not be able to sell the products anywhere else as Pakistan and Bangladesh will not be able to consume. A good deal of money was lost due to the buyers bankruptcy because they did not collected the containers at seaports.
I suppose the spring sale of chickpeas will be quite fierce for the Russian producers if the demand does not appear from behind any natural cataclysm.
For now there is no demand for the small kabuli (size 6-7 mm). All the crushers in Turkey, Egypt, the UAE have plenty of kabuli in stocks and India has enough to sell (size 12+) that is why the prices are falling by $20-$30 every day. The Russian farmers are not ready to sell chickpeas this spring already by small consignments for 28`000-30`000 RUR/t as in September the prices were observed at the range of 48`000-50`000 RUR/t. We (traders) are waiting for the correction and that the “valley of death” – the smallest prices – is over.
In terms of peas I would say that the most important role in trend formation is going to play India as it is the biggest producer and consumer of pulses. The further market development depends on political decisions of the government. On the beginning of March the market was expecting yet another tax tightening in India – e.g. absolute restriction of import of pulses. Thus, on March 1, 2018 the import tax rate for red chickpeas was increased from 40% to 60%. The tax rate for kabuli is unchanged – 40%.
For now the majority of countries producing pulses – Russia, Ukraine and Canada – have plenty stockpiles of products.
On the market of yellow peas we can observe the price range of $265-$270 USD/t CFR Indian ports March-April delivery. Pakistan for now does not permit the import for the April-May delivery. If there is no import restriction or import tax hike in India there is a possibility for India to import around 1.2 mln tonnes of new crop peas primarily from Black Sea region due to the low prices.
- Are Russian pulses competitive in terms of the global market? Are there many difficulties in developing the new markets?
The demand for Russian chickpeas is high because of the low prices. In order to be competitive the farmers should change the seeds of chickpeas and the technologies of planting and storaging. For chickpeas the size and the homogeneity of shape are important.
Herewith, chickpeas grown in Samara oblast, Saratov oblast and Volgograd oblast have degraded. In 2017 MY the quantity of peas in consignments of chickpeas reached up to the 10-15% which is absolutely unacceptable. Some traders of chickpea seeds could stir in the seeds of peas due to the high demand. Thus, the presence of peas in chickpeas consignments result in reduced importers’ credibility to the producing country. Thereby, Russian chickpeas were imported by those countries which are not ready to pay more for higher quality – i.g. Pakistan, India. But, in order to sell the product into the EU, Middle East countries and America, the producers should offer better size, packaging and purity.
Our farmers and traders are learning very fast. Only 3 years ago nobody was considering bagging and clearing the pulses in Russia, and now this option is offered by most of the exporters. Many traders now start contracting the production of chickpeas and take upon themselves the responsibility for providing the farmers with quality seeds.
Herewith, Ukrainian peas is of excellent quality. Indian farmers even say that it is better than the Canadian one – the size is bigger, the color is more flat, it is very similar to the French one but cheaper.
Russian peas is similar to the Canadian one. It is different as almost all of the producing regions are in different climate zones thus the size and color of it differs. In order to enter more marginal markets it is necessary to invest into the crashing – i.g. clearing, hulling, packaging. Now many holdings work this way- they export the Russian peas in packs, cleared and whole or split.
- If we speak about the marginality of pulses in Russia, what do You think is more profitable for exports?
I believe that we should stop export the raw materials. The marginality is based on the primary and secondary crushing of the product. The decreasing of the sweeps, the offer of different types of packaging and the clearing of the product – all of these bring the extra profit, form the stable channels of distribution and also improve the reputation of both the exporter and the producing country.
The speculation is a good tool for gaining more profit but you should realize the risks. The current season has become a wake-up-call for many traders on the domestic market as well as on the global one. The future season is going to be the season of buyers. 2019 might be a season of high prices as it was in 2015.
Interviewed by Polina Kalayda, APK-Inform Agency
