Checking the Pulse: Global Pulse Prices under Pressure

Global pulse prices went up a lot between 2015 and the middle of 2016, but saw a quick yet significant decline in the second half of last year, raising the question where prices will go in the short term and what shape the global pulse industry will take in the coming years.

Figure 1: The long pulse price rally has been stunted by the 2016 Indian crop, 2010-2017

What are pulses?

Pulses can be broken down into many different categories, with dry beans being the largest, followed by chickpeas, dry peas, and various others.

Production and exports

Global production and trade of pulses grew heavily in the last decade, and out of a global production of more than 80m tonnes (see Figure 2), about 20% is traded globally.

Lentils, dried peas, chickpeas, and kidney beans make up almost two-thirds of global trade. Over 50% of pulse exports are finding a home in south Asia, while the dominant exporters are Canada, Australia, and Burma, and, to a smaller extent, also the US, China, and Russia.

Figure 2: Evolution of global pulse production, 1961-2017

A look at the key player in pulses

India is the dominant force in the pulse market: it produces around 25% of all pulses, consumes about 30% of the pulses and imports approximately 40% of the global trade. So the country is a driving force behind the volatile price in recent years.

India went through two years of weather-reduced pulse crops, which resulted in surging import needs and a strong uptick in domestic and global prices. As pulses are a staple in India, the price increase also had a substantial impact on inflation. Since Q4 2016, however, prices have again fallen substantially, as India’s production reached a record, up 30% YOY.

Key pulse exporters

Major exporting countries, including Canada and Australia, also produced a very large crop in 2016/17. High global supplies have put pressure on prices.

Canada is the largest global exporter of pulses and its production has increased about 40% in 2016, resulting in a substantial export surplus and rising domestic and global stocks. Canada is exporting about two-thirds of its production, with more than half of it going to India.

Australia is the second largest global exporter and harvested a massive crop in 2016/17, up about 50% YOY, as local consumption is fairly small. More than two-thirds of its production is shipped, with India being a key destination market.

Outlook for 2017/18

The declining prices will have an acreage impact, but pulses remain a profitable crop for farmers. Australia’s pulse area has increased for the next crop (for more, listen to our podcast Pulsating Pulse Prices—What’s in Store for Chickpeas?) Canada is expected to have decreased its dry pea area in 2017 by about 3% and the lentil area is down 25% YOY. Looking ahead we expect lower prices to continue in the next 12 months.

The longer-term picture

Per capita consumption of pulses globally had been relatively stable from the 1990s until 2005, but since then, we’ve seen an uptick driven by developing countries. In these developing countries, food use of pulses is at about 75%, on average, while in the developed world it is at about 35%, with the majority there going into feeding. We expect per capita consumption to continue to rise over the next years. In India for example, which has a an approximate 10kg pulse consumption per year and person, consumption is fairly priced and income-elastic, which means that rising income in India can be expected to continue to drive pulse consumption up further.

Rabobank will publish a more in-depth analysis of the pulse market later this year.