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Uncertain price outlook for desi chickpeas

by Rob Brealey, 27 March 2018

IF YOU grow pulses, you would know of the Indian government’s recent intervention in the market; introducing harsh import duties to try and lift local prices. It seems timely then to look forward to the potential impact on new-crop desi chickpea prices to see if we can provide Aussie farmers with some assistance in their planting decisions.

Firstly, do we even need India to buy?

It depends on the size of our crop. In addition to this, Australia does export more than 90 per cent of its total chickpea production, so we are dependent on export markets for our sales and price determination.

Export demand outside India can fluctuate depending on several factors, and is in the ballpark of 500,000 tonnes per annum, with major markets being Bangladesh, Pakistan and the United Arab Emirates.  Add to this another 100,000t for the local domestic requirement and you have a total demand of approximately 600,000t per annum outside India. In the past three years, our crops have produced 1.2 million tonnes (Mt), 2.3Mt and 1Mt, so you can see we have needed India to take the surplus and provide the market with price support.

So, what does this mean for prices going forward?

There are many factors that will impact prices, the least of which is neither the eventual size of our crop, or the outcome of the monsoon season in the sub-continent. It’s not even what import duties, or other measures, are in place in India come harvest time here in Australia. It seems, neither we, nor anybody else, can forecast with any certainty today.

One of the big side effects that government intervention brings in any market is uncertainty. Who would want to plan exports to India today without knowing if the duty will be zero or 100pc? Let’s assume for a moment that everything remains the same. A big assumption I know, but it will at least give us a guide as to what the price influence might be should we need our Indian friends to buy.

The current import duty for chickpeas in India stands at 60pc, and once you add some taxes to the duty, the real duty becomes 66pc. Current local values in India are circa 37,000 rupee/t, or US$570/t, but the government’s ambition is to push values above 44,000r/t, or US$670/t.

Let’s assume India eventually achieves this. This will become the price we need to beat to capture demand in India. After deducting the duty, freight and loading costs, this comes back to circa AU$425-$450/t delivered to the port in Australia.

To reiterate, we are not saying that this is what the price will be at harvest. There are many unknown factors that could still influence the outcome, both positively and negatively. We do believe, however, that these are realistic values to be using for desi chickpeas when planning this year’s winter-cropping program.

This week’s market report was provided by COFCO pulse trader, Rob Brealey.

 

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