Canadian exporters are slowing sales of peas and lentils to India over fumigation policy

India requires shippers to fumigate crops with methyl bromide, an insect-killing gas, in the country of origin, but has historically made an exception for Canada.

WINNIPEG -- Canadian exporters are slowing sales of peas and lentils to India, threatening C$1.1 billion ($762.95 million) in annual trade of the food staples, over risk that New Delhi may reject shipments under its tougher approach to pest control.

Also read, Canadian Pulse Industry Sets Ambitious Target for Future Growth.

India requires shippers to fumigate crops with methyl bromide, an insect-killing gas, in the country of origin, but has historically made an exception for Canada, the world's biggest pulse exporter. Methyl bromide, an ozone-depleting substance, is not made in Canada, but is allowed for use in limited situations.

Canada's exemption, allowing crops to be fumigated on arrival in India, is set to expire on March 31, overlapping with the 30-40 days it takes for shipments to reach India from Canada.

"It's just a completely dead market right now for us," said Tamara Khoma, trader at Providence Grain. The company rerouted a pea shipment to China that had been headed for India.

"Sales to India have been almost non-existent," said Zaid Qadoumi, chief executive at Broadgrain Commodities. "We are in waiting mode."

Pulse crops are a popular protein source in India, the world's largest importer.

India’s pulse production looks to rise this year by 35 percent from a year ago to 22.14 million tonnes. Even so, the country also needs to import yellow peas and lentils, said Pravin Dongre, chairman of the India Pulses and Grains Association.

"The entire supply chain will be disrupted if the government sticks with the new rule," Dongre said, adding that fewer imports could lift prices in India.

If India does not exempt Canada, shipments may be rejected at Indian ports and have to be fumigated somewhere else at great cost, said a Mumbai-based importer not authorized to speak publicly.

New Delhi's fumigation stance may also curb wheat imports from Russia, France and Ukraine.

A Canadian pulse exporter, who was not authorized to speak publicly, said it is difficult to say if its sales have slowed because of the fumigation issue, as it is a seasonally slow period and India has ample supplies.

AGT Food and Ingredients Inc, a Saskatchewan-based pulse crop shipper, is optimistic of a resolution before the deadline and that shipments will continue as normal, Chief Executive Murad Al-Katib said in an email to Reuters.

Canadian Agriculture Minister Lawrence MacAulay plans to visit India early next month, and has said that his officials are working with India on the fumigation issue.

Canada merits an exemption from India's fumigation policy because its cold winters kill pests, said Gord Kurbis, director of market access at industry group Pulse Canada.

Pea and lentil prices in Canada have dipped slightly, but remain strong because of demand in other markets and hopes that the fumigation issue will be resolved, said Chuck Penner, analyst at LeftField Commodity Research.

SOURCE Rod Nickel and Rajendra Jadhav, Reuters