What are the factors behind the increase in Russian pea exports to global markets? And what potential is there for further expansion over the next few years?
- Russian pea exports during July-December 2021 exceeded exports for the entire 2020/21 (July-June) season and amounted to 510,000 tonnes on the back of increased global demand, according to Refinitiv.
- In contrast to grains and oilseeds shipments, there is no export tax for this crop, which was attractive to Russian exporters.
- High global demand opens new opportunities for Russian farmers and intensifies competition between exporters and processors in the short term.
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In 2021, Russia introduced export grain and oilseeds taxes to curb domestic food inflation. Grain exports were also expected to be subject to quotas in 2022. However, such measures have not yet been extended to pulses, including peas.
Exports of Russian peas on the rise
Reduction in crops in the main pea producing countries combined with the growing global interest in meat substitutes has resulted in higher exports of Russian peas.
The pea crop in Canada, the world’s largest producer, was down 45 percent to 2.5 mln tonnes due to severe drought in 2021.
Canadian dry pea exports in the 2021/22 season could be reduced by 36 percent to 2.3 mln tonnes compared with the 2020/21 season, according to an estimate by Statistics Canada (STC).
In the United States, the pea crop in 2021 reached 551,110 tonnes compared with 985,500 tonnes in 2020. This was caused by a decrease in yield and a cut in acreage of 3 percent to 392,550 hectares, according to the U.S. Department of Agriculture (USDA).
In Ukraine, the pea crop in 2021 increased by 18 percent per year to 570,000 tonnes. However, it did not recover to the levels of 2018, after which the crop was almost halved, after a sharp drop in exports to India.
Russian pea exports slowed down in November. Farmers already sold a significant part of the 2021 crop against the background of high demand and attractive prices.
Importers were ready to buy more, while the end of the season is still far away.
Growth in Russian pea crop
The Russian pea crop has grown continuously since 2018. The sown area under this crop increased by 54 percent over the past five years since 2017, and in 2021 amounted to 1.45 mln hectares, according to Russian statistics services data.
Traditional regions of pea cultivation are across the south of Russia, in the Caucasus and the Volga region. The Volga region may expand production next year due to rising production costs for farmers and a decrease in spring crop yields after unfavourable weather in 2021.
“This year we planted fewer winter crops than planned. We are likely to replace wheat crops killed in winter with peas, niche crops and oilseeds in the spring,” one farmer in Volga region said.
Russian farmers cultivating this crop have a good chance to reduce their costs because peas need less nitrogen fertilisers than other crops.
Global trends in pea exports
In 2020, world exports of dry peas increased by more than 6 percent to 6.7 mln tonnes compared with 2019, according to the International Trade Center (ITC). Russia consistently ranks second in world pea supplies after Canada.
China is the largest importer of peas, and Bangladesh and Pakistan are also significant importers of the crop.
China’s share of pea imports of peas in 2020 was 42 percent, with Bangladesh and Pakistan 9 percent and 7 percent respectively. Imports to India, one of the world’s largest consumers, fell by 38 times to 98,000 from 2017 to 2020, according to the ITC.
“The Indian market was closed to Russian supplies, although Russian exporters hope to resume supplies to this country,” one Russian trader said.
China’s imports of dry peas will continue to set new highs, according to the USDA China Pulses report. Imports grew 3.6 times to 3.1 mln tonnes over the past five years from 2015/16 to 2020/21.
“There is a consistently high demand for peas in China. We look forward to expanding Russian supplies. So far, due to special requirements for quality and safety, suppliers from other countries prevail in the Chinese market,” a representative of the Russian agricultural holding said.
However, the possible increase in Russian pea production and the active work of the Russian authorities on phytosanitary agreements for the access of Russian agricultural products to Chinese buyers may increase competition in the Chinese market.
Seasonal Russian pea exports, 2016-2021, in tonnes
Potential for expansion in exports
World population growth, increased demand and high food prices have been the main drivers of agricultural markets in recent years.
There is a growing global demand for peas as an alternative protein source as an increasing number of consumers look at vegetable protein as a healthy substitute for meat products.
Such global trends create an opportunity to increase Russian production and exports of peas as raw materials. And the inclusion of Russia in the global process of production and consumption of alternative sources of protein is inevitable.
A number of Russian companies have announced the construction of facilities for deep processing of peas for food products, sports nutrition and animal feed. The start of pea protein production is expected in 2023. The enterprises plan to process in aggregate up to 400,000 tonnes of peas per year, with the possibility of increasing the volumes.
With a continued weakness in the development of the processing sector, Russian companies are able to make money on pea exports in the next couple of seasons, if there are no government export restrictions. But gradually competition with processors is likely to intensify, given the potential expansion of capacity.
For now, exporters are looking to producers who will be able to expand the acreage of peas in the new season of 2022/23 (July-June).