Economists specializing in agricultural markets are watching the ongoing diplomatic dispute between Prime Minister Justin Trudeau’s government and India closely to see if it spills into a trade war as the South Asian nation is a main trading partner when it comes to pulse crops such as lentils.
As of 2021, India imported over 77% of its dried and shelled lentils from Canada. Agriculturally heavy provinces like Saskatchewan also ship half of their lentil crops to India each year.
According to North Dakota State University crops economist and professor Frayne Olson, the United States could be the big winner as a result of the conflict.
Speaking on a market outlook webinar on Saturday, Olson said the United States is in a prime position to benefit from market spillover for specific crops.
“There’s political tensions going on between India and Canada right now which is now spilling over into the agricultural sector,” said Olson.
“The largest potential agricultural trade impact would be for the Canadian pulse crops. (The United States) is both a competitor and a supplier of pulse crops.”
When it comes to lentil exports, the United States currently only supplies a little over 1% of India’s needs but it could take a larger share of the pie, should the conflict escalate further.
“India buys approximately $1.4 billion Canadian dollars of pulses from Canada and approximately 50% of the Saskatchewan lentil crop goes directly to India so this is a big deal for the Canadians,” said Olson.
“It is something to watch because there could be some spillover pressure or spillover opportunities into US markets.”
Agri-food experts have already warned that Canada would suffer more than India should the dispute escalate and disturb ongoing trade.
Following Prime Minister Trudeau’s accusation that the Indian government was allegedly involved in the assassination of Hardeep Singh Nijjar on Canadian soil, lentil sales to India slowed down, according to a report by Reuters based on industry sources.
“Industry officials are concerned that there could be trade restrictions by the governments owing to current tensions between the countries,” senior vice president of the major exporter Olam Agri India Nitin Gupta told the outlet.
Despite this, the Indian government has maintained that it has not instructed importers to change their buying habits yet.
On top of the diplomatic dispute, the Canadian government halted talks of a multi-billion dollar trade deal with India last month just prior to Trudeau’s explosive allegations.
