How Did Canada’s Increasing Lentil Production Affect Turkey? Is There A Possible Win-Win Situation for Both Countries?

Turkish Journal of Agriculture - Food Science and Technology, 6(12): 1708-1712, 2018 Turkish Journal of Agriculture - Food Science and Technology Available online, ISSN: 2148-127X www.agrifoodscience.com, Turkish Science and Technology How Did Canada’s Increasing Lentil Production Affect Turkey? Is There A Possible Win-Win Situation for Both Countries? Cevher Özden* The Department of Agricultural Economics, Faculty of Agriculture, Cukurova University, 01330 Adana, Turkey ARTICLE INFO Research Article Received 06 February 2018 Accepted 08 August 2018 Keywords: Lentils Foreign trade Competition Sustainability Constant market share ABSTRACT Competition is fierce in the world markets of agricultural products. It is especially harder for developing countries to compete with the wealthier industrialized countries. Canada entered in the lentil production mainly for export purposes in the early 1990s and exports nearly all of its lentil products every year. As Canada has become the dominant power in lentil trade, Turkey’s lentil production has declined notably. In the study, Turkey’s adaptation to this trend is investigated. Based on the results, it is concluded that Turkey’s market share has not changed in its traditional markets and its export has risen both in quantity and value. For instance, Turkey’s lentil export has increased from 127 Thousand tons in 1997 to 178 Thousand in 2013. This is achieved through partnerships between Canadian and Turkish entrepreneurs. Furthermore, lentil producers in Turkey have shifted to alternative crops, which yields higher income. *Corresponding Author: E-mail: DOI: https://doi.org/10.24925/turjaf.v6i12.1708-1712.1840 Introduction Countries, producing the same type of products, are in an intense competition in all sectors. This is especially evident in agriculture sector because plantation and harvest periods of the same product could be different in distinct parts of the world, which enables close monitoring of production decisions, yield and policies of rival countries. Archeological evidence suggests that pulses were first cultivated in the Mesopotamia region between Euphrates and Tigris, which is located between Turkey, Syria and Iraq (AGT, 2017). Therefore, each pulse crop is an important food product produced and consumed throughout this region. Lentil, a pulse product, is also a traditional export item for Turkey, Syria and Iran in this region. Turkey became leader pulse producer and exporter during 1980s thanks to the heavy agricultural subsidies. This situation changed in the early 1990s when Turkey’s transition to free market economy gained momentum. Limited economic sources of Turkey were not able to support industrialization and heavy agricultural subsidies at the same time (Ozden, 2015). In accordance with the radical economic decisions adopted following the severe economic crisis in 1994, agricultural supports and guarantee of government purchase were abolished for certain products including lentils. Furthermore, obligations assumed in General Agreement on Tariffs and Trade (GATT) and World Trade Organization (WTO) agreement required the liberalization of agricultural trade, which necessitated Turkey to take steps to reform the agriculture sector. Canada, Australia and USA started to increase their lentil production as of late 1980s and early 1990s, which increased competition in lentil trade. In Turkey, Inward Processing Regime (IPR) entered into force in place of Export Support Regime (ESR) in 1996. Turkey started to implement IPR fully in 1997 (Deloitte, 2017). The aim of Inward Processing Regime is to enable exporters to supply inputs at the world market prices for the production of their exports without being subject to customs duties, including Value Added Tax as well as trade policy measures (YOIKK, 2017). Turkey included lentil in this framework and started to export lentils primarily from Canada and re-export them to Middle East and Africa with the intent of sustaining its position in lentil trade. In a recent report, the Union of Turkish Agricultural Chambers (UTAC, 2018) has reported that Turkish lentil producers do not earn enough to cover their expenses, therefore, approximately 80% of lentils consumed in Turkey are imported mainly from Canada, and Turkey’s lentil productions are mostly exported to developed countries due to its better taste and high protein content. In his PhD thesis, Ozden (2015) investigated the history of pulse markets and export competitiveness of Özden / Turkish Journal of Agriculture - Food Science and Technology, 6(12): 1708-1712, 2018 Turkey and proposed certain policy changes. Gandhi (2006) underlined the importance of Asian countries in pulse trade and expected that India’s import of pulse products would continue to increase in the future. Ton et al. (2013) analyzed the structure and problems of pulse production in Turkey. They concluded that the real potential of Turkey is not utilized enough. They proposed that new species should be developed to meet the demands of foreign markets and producers should be supported with certain incentives. The previous studies mainly dwell upon the policies to increase domestic production and protect Turkish producers against imports from foreign countries. However, this is not a sustainable approach especially for developing countries with limited economic sources. In this regard, the main question examined in the current study is “How Canada’s increasing lentil production affected Turkey’s lentil producers and exporters”. The subject is especially important in that Canada is an industrialized G7 country with broad economic strength, while Turkey is a developing country with relatively limited economic resources. The results will provide guidance for developing countries to find their own ways in dealing with the intense competition in the world markets especially with developed and wealthier countries. Materials and Methods Production and trade statistics were obtained from FAO and TSI databases. In addition, the publications of prominent organizations and unions active in lentils sector were used. In order to analyze Turkey’s lentil trade, Constant Market Share (CMS) analysis was employed. CMS is mainly used to inspect the changes in a country’s export performance for certain markets and periods and it explains the transformation with three components, (1) Market Share Effect, (2) Commodity Composition Effect, and (3) Commodity Adaptation Effect (Erlat and Erlat, 2012; Foresti, 2004): 𝑋𝑖𝑗 𝑆𝑖𝑗 = ∑𝑁 𝑖=1 𝑀𝑖𝑗 = 𝑎𝑖𝑗 𝑏𝑖𝑗 (1) 𝑎𝑖𝑗 = 𝑋𝑖𝑗 ⁄𝑀𝑖𝑗 (2) 𝑏𝑖𝑗 = 𝑀𝑖𝑗 ⁄∑𝑁 𝑖=1 𝑀𝑖𝑗 (3) 𝑋𝑖𝑗 : Country a’s export of commodity i to country j, 𝑀𝑖𝑗 : Country j’s import of commodity i, 𝑆𝑖𝑗 : Market share of country a’s export of commodity i in country j’s imports, 𝑎𝑖𝑗 : Commodity share of country a’s export of commodity i in country j’s import of i 𝑏𝑖𝑗 : commodity share of i in country j’s import, the change between time “0” and “1” is defined as follows (...truncated)