It’s been almost a year since the Indian government put policies in place that nearly stopped the movement of Canadian pulses into the country as part of an effort to boost farmer incomes and, ultimately, become self-sufficient. It’s been a challenging time for Prairie farmers as prices have plummeted in response to our largest customer drastically reducing their purchases.
The hope is that the current policy basket of import tariffs, import quotas, government purchases of stocks, and increasing Minimum Support Prices (MSPs) will be short-to-medium term in nature. There is much political motivation behind the policies as the government looks ahead to key elections in early 2019. India is also coming off a year of record-large production, which makes it easy to put measures in place to keep imports out.
However, it’s possible that many of the policies could stay in place beyond the elections and remain entrenched until domestic pulse supplies start to tighten up, which doesn’t appear likely until there is a real yield setback during one of their growing seasons. There is an unprecedented 5.5 MMT of government buffer stocks, and MSPs are set at a level intentionally designed to increase seeded area and production.
The government concern around pulse supplies is understandable. While the average Indian has nearly 30 percent more food available than 50 years ago, the availability of pulses has not improved, even though pulses are the primary source of protein for most of the population. Poor returns means that farmers have not been growing pulses on the fertile, well-irrigated land, and new production technology has been poorly adopted. While today’s pulse prices remain very low, it was only two years ago that prices were extremely high, putting intense pressure on the government.
It’s highly questionable whether the measures taken in India are effective. And these measures could, in turn, hurt Prairie farmer pocketbooks and how much is politically driven to appease key voting blocks. This is frustrating, and we do the exact same thing: the current NAFTA negotiations – certain, relatively small subsectors of the economy have the potential to derail a trade deal that is otherwise beneficial for the masses (autoworkers, supply management agriculture, allowance for cultural exemptions for Canada, while the U.S. has their own long list of favored groups.) In each of these cases, the economic soundness of the negotiating position comes secondary to the political implications. This is similar with every country in each trade deal they make and with most domestic policy measures passed.