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Summary
The Australia-India Economic Cooperation and Trade Agreement (AECT) is now facilitating preferential lentil trade between the two nations. Under this strategic partnership, Australia can export up to 150,000 tonnes of lentils to India at half the standard import duty, offering significant benefits to Australian growers while helping India manage food inflation in the crucial pulses segment.
Preferential Tariff Structure
The timing of this shipment is particularly noteworthy as it follows India's reimposition of import duties on lentils from April 1, after a period of duty-free imports. While India now applies a 10% tariff on lentil imports, the AECT agreement provides a substantial advantage to Australian exporters by reducing this duty by half for up to 150,000 tonnes annually.
This quota system is further structured with quarterly allocations of 37,500 tonnes, with an additional provision that allows unused quotas to roll over to subsequent quarters - demonstrating the flexibility built into the agreement to optimize trade flows throughout the year.
Market Impact and Supply Chain Dynamics
The recent shipment originated from Port Lincoln in South Australia and was managed by Viterra, one of the region's leading grain handlers. According to market data, Australia has already exported 275,000 tonnes of lentils to India between October 1, 2023, and February 28, 2024, highlighting the robust trade relationship between these agricultural powerhouses.
The AECT agreement comes at a strategic time for both nations:
- For Australian growers, it secures continued access to India's massive market despite the reintroduction of import duties
- For India, it helps manage domestic food inflation by ensuring steady supplies of protein-rich pulses, which align with the government's reported preference for plant-based protein sources
Price Trends and Competitive Landscape
Despite the favorable trade terms, market forces are still impacting prices. Australian pulse stocks have been declining, putting upward pressure on prices even as India harvests its winter crop. Current market quotes show:
- Australian chickpeas reaching $800/tonne in forward sales
- Chickpea prices recently surpassing $700/tonne, with Australia raising rates by $25 to $705/tonne for May-June delivery to India
- Higher rates for Pakistan ($745/tonne) due to stronger demand
In the red lentils segment, competition between Canada and Australia is helping to stabilize prices. Canadian exporters are offering May-June red lentil deliveries at $650/tonne, while Australian suppliers are quoting slightly higher at $660/tonne.
The competitiveness of Australian exports is also being enhanced by currency factors, with the Australian dollar trading at its lowest levels since the COVID-19 pandemic, making Australian agricultural exports more attractive to international buyers.
Conclusion
The successful implementation of the AECT agreement represents a win-win scenario for both Australia and India in the global pulses trade. For Australian growers, it provides preferential access to one of the world's largest markets for pulses, while for Indian consumers, it helps ensure a stable supply of essential protein sources at reasonable prices. This trade relationship highlights the increasing importance of strategic agricultural partnerships in addressing food security challenges and managing commodity price inflation in an interconnected global market. As trade patterns evolve and seasonal production shifts between hemispheres, agreements like the AECT will play a crucial role in balancing supply and demand dynamics across the global agricultural landscape.