By Brian Clancey, STAT Publishing
March 2025

Many years ago, while speaking at Saskatchewan Pulse Growers’ annual conference, I was reminded that markets did not perform the way I had predicted a year earlier. My response was, “things change.”

There is nothing else to say about the difference between what we expected last September and October and what is happening now.

At that time we viewed the United States (U.S.) as a reliable trading partner, expected unstoppable demand from India, and believed we could easily protect and maybe expand our market share in China.

Cracks in those ideas started to appear in November. By Christmas, those thoughts were replaced by uncertainty or anxiety.

Despite warnings, Canada was caught off-guard when the U.S. imposed a 25% import duty on everything except oil, which faced a 10% duty, on February 4. A few phone calls and promises about border security and anti-drug efforts yielded a 30-day pause before tariffs would come into effect.

A week later, the U.S. imposed a global import duty of 25% on aluminum and steel. Those affect Canada more than any other country. Because North American industries became highly integrated under the North-American Free Trade Agreement (NAFTA) and the United-States-Mexico-Canada Agreement (USMCA), Canada is the largest supplier of those metals to the U.S., where it is refabricated with some finished goods exported to Canada.

Interestingly, while the original NAFTA agreement was welcomed by Canada’s pulse industry, some voices did warn against relying on the U.S. to consume what we grow. Now that Canada faces the risk of a trade war with the U.S., there is wider agreement over the need to limit dependency on a small group of destinations.

Other than dry edible beans, the U.S. is an important but not dominant destination for peas, lentils, or chickpeas. Since 2020, an average of 29% of all beans exported from Canada were shipped to the U.S. along with 15% of all chickpea shipments, 9% of all peas, and 4% of all lentils exported.

During the same period, net imports by the U.S. averaged around 146,900 tonnes for peas, 14,000 tonnes for chickpeas, and 45,200 tonnes for beans. On the other hand, it exported an average of 14,900 tonnes more lentils per year to Canada than it imported.

Canadian pulses are used in combination with those grown by U.S. farmers. They find their way into everything from pet foods to soups and plant-based protein substitutes. Though there are companies in Canada which process pulses for human and pet food consumption, U.S. manufacturers have reasonably good penetration in Canada’s hotel, retail, and institutional markets.

In an annual retail food industry report, the U.S. agricultural attaché for Canada noted we are “the largest overseas market for U.S. high-value, consumer-oriented products”, with more than 98% entering Canada duty-free.

Reviewing product categories with the best growth potential, it seems likely some contain Canadian-origin pulses. In the healthy snack category, retail sales of chips made from pulses, vegetables, and bread jumped 17.5% between 2022 and 2023. Pet food sales grew 9%, with some products shipped from the U.S. likely containing Canadian pulses.

To bring this into perspective, during the past five calendar years, Canadian pulses covered an average 25% of estimated U.S. domestic disappearance of peas, beans, lentils, and chickpeas. This ranged from a high of 56% for lentils to a low of 15% for dry edible beans.

A 25% import duty on pulses shipped to the U.S. would have varying impacts prices to growers in the two countries. This depends as much on the impact import duties would have on prices paid by human and pet food manufacturers and packagers as on the relative importance of the U.S. market.

On average, only 4% of all lentils exported by Canada and 9% of all peas end up in the U.S. However, those quantities account for 56% and 31% respectively of average annual U.S. domestic consumption.

The implication is import duties may have no impact on prices offered to Canadian pea and lentil growers. By contrast, they could increase prices paid to U.S. growers, because of the opportunity to sell more product to domestic consumers. Prices could be lifted closer to the landed cost of Canadian product after import duties are applied.

Chickpea and dry edible bean growers may face a different situation. The U.S. buys 15% of chickpeas shipped from Canada and 29% of all dry edible beans. On average, they account for 23% and 15% respectively of estimated U.S. domestic usage.

The lower the percentage, the less willing importers will be to absorb the cost of import duties if similar product is available in the U.S. Looking at dry edible beans, an average 105,400 tonnes or 29% of all beans exported went to the U.S.

Of the total, both pinto and black beans accounted for 12% of shipments, compared to 4% for navy beans and 61% for undeclared classes. Judging from U.S. imports for light and dark red kidney, along with navy beans, farmers in Western Canada likely rely more on that U.S. than those in Eastern Canada.

On the other hand, if Canada imposes retaliatory duties on pulses and food products in which they are ingredients, this could give Canada’s domestic food manufacturing and packaging industry a boost.

According to the U.S. agricultural attaché, our food processing industry is comprised of 8,500 establishments. Roughly 92% are small companies with less than 100 employees. If retaliatory import duties result in a solid increase in the landed cost of U.S. manufactured products, Canadian companies could see a fundamental improvement in demand.

The risks of trade tensions between Canada and the U.S. come at a time when markets broadly expect demand from India to plunge. By the middle of February, markets were in general agreement that India will not extend deadlines for duty-free imports of pulses, other than allowed under bilateral trade agreements.

This will have a direct impact on gross exports of yellow peas, which could last for years. This would likely reinstate China as the most important destination for Canadian peas, but Russia is an increasingly important competitor in both China and India.

At 2.74 million tonnes, India’s yellow pea imports between January and November of 2024 were the third highest on record. Canada was the largest supplier at 1.325 million tonnes, followed by Russia at 863,230 and Turkey at 230,280. There is a general perception that peas shipped from Turkey may have originated in Russia.

Unfortunately, Canada’s dominance of China’s market ended last year. Exports for the calendar year reached 592,600 tonnes, down from 1.58 million in 2023. By contrast, Russia’s exports only dropped from 908,300 to 646,500 tonnes.

The decline in total imports reflected weaker demand for peas for livestock feed. More significantly, the fact Canadian shipments were under 600,000 tonnes suggests Canada is facing more competition in China’s food sector.

Clearly, assuming tomorrow’s markets will be the same as yesterday’s is a mistake. Governments are inserting themselves more profoundly in markets both directly and indirectly. The implication is the more diversified one’s markets, the more secure the future.

Based on U.S. and Canadian trade data and supply data

Sources: U.S. Census Bureau Trade and Statistics Canada

Brian Clancey is the Editor and Publisher of www.statpub.com market news website and President of STAT Publishing Ltd. He can be reached at editor@statpub.com.