Canadian lentil sales to India slump amidst diplomatic tensions

CANADIAN lentil sales to India have slowed since prime minister Justin Trudeau said last week he suspected India of involvement in an assassination on Canadian soil, fearing reprisal from New Delhi that could limit trade, industry sources in both countries say.

Trudeau said that Canada was "actively pursuing credible allegations" linking Indian government agents to the murder of a Sikh separatist leader in British Columbia in June. India's foreign ministry called the allegations "absurd."

Canada is India's main import source of lentils, a protein-rich staple used to make daal curry.

Reduced Indian purchases would likely cut the prices Canadian farmers receive during harvest. But such a move could also inflate India's domestic food prices, which would be politically risky ahead of a national election next year.

After a drop in output, India banned wheat exports last year, followed by a ban on non-basmati white rice this year to preserve supplies of those staples.

"Industry officials are concerned that there could be trade restrictions by the governments owing to current tensions between the countries," said Nitin Gupta, senior vice president of Olam Agri India, a major importer.

There are no such plans by India and Delhi has not instructed importers to refrain from purchases, said a senior Indian government official, declining to be named due to the sensitivity of the situation.

The Indian government has suspended issuing visas to Canadians and each country has expelled some diplomats.

Canada is not currently taking any action that would directly affect trade with India, said an official with the Canadian Global Affairs department, declining to be named.

Indian buyers bought significant supplies of Canadian lentils earlier in the year for delivery after harvest, said Kevin Price, senior export merchant at Winnipeg-based crop trader Parrish & Heimbecker.

"Obviously we're concerned about making sure (the sales) get executed," Price said, adding that he's not aware of any cancellations. "Do they want to take on more now? No. They're taking a wait-and-see" attitude.

Due to India's poor crop, lentil prices are high, but since Trudeau's comments Indian offers for Canadian supplies have dropped 6 per cent to around $770 per metric ton, Price said.

A second Canadian exporter said while Indian buyers have become hesitant, overall global demand for lentils remains strong.

Canada was the biggest supplier of lentils to India during India's 2022/23 financial year ended on March 31 with shipments of 485,492 metric tons worth $370 million, accounting for more than half of India's total lentil imports, according to data from India's trade ministry.

The trend had been continuing, with India's imports of Canadian lentils from April to July jumping 420 per cent from a year ago to 190,784 tons, the trade ministry data showed.

India consumes around 2.4 million metric tons of lentils annually, but local production falls short at 1.6 million tons, said Bimal Kothari, chairman of India Pulses and Grains Association.

Indian buyers are now seeking lentils from Australia and slowing purchases from Canada, said a Mumbai-based dealer with a global trading firm, who was not authorized to speak publicly.

"Inflation within the pulses group is currently very high, making Canadian lentils a critical need for India. Any measures taken to restrict imports would likely contribute to inflation, and New Delhi would likely avoid such actions," the dealer said.

(Reuters)