***Original published in South Mountain Press, April 5, 2019***
China’s Canadian Canola Boycott not Affecting Local Farmers – Yet
Ever since last December when Canadian authorities arrested Huawei executive, Meng Wanzhou, the Chinese government has been putting pressure on Canada to release the Chinese national who is facing extradition to the United States. Among the tactics employed by China has been the slowing down and now outright blocking of Canadian canola imports from the Winnipeg based, agribusiness company Richardson International. This begs the question of how is this going to affect the local farming economy and summer seeding programs.
After speaking to area farmers, seed companies, and elevator operators, it appears that at least for this season, farmers will not be changing their 2019 seeding programs due to this latest international trading spat.
Agriculture Canada spokespeople had no comment other than they are aware of the situation and people are working on it.
Jeremy Andreychuk, who farms north of Newdale, has no plans to change this year’s planned crop rotation of a combination of canola, wheat, barley, and oats. “We will seed our usual acreage of about 1250 acres of canola. Sure, prices for canola are a little lower but I think after this issue resolves itself, there might be a rebound. The Chinese market for canola oil is strong and most of them use it for cooking.”
Agriculture Canada literature backs up this sentiment. The Chinese have a large population with an oil-based cooking style. Due to the increase in their living standards and awareness of health and nutrition, they are demanding ‘higher-end and healthier oils with value-added nutrition.’ Growth for Canadian canola seed exported to China has grown from 2.9 million tonnes in 2013 to 4.8 million tonnes in 2018.
Local area seed companies are also backing up the assertions that farmers are not overly worried over this latest canola issue. Ron Knight of Knight Seeds in Hamiota does not foresee any major changes to grain farmer’s programs for this upcoming season.
As Ron explained, “Farmers had already pre-bought canola seed and signed contracts with the elevators by last December before this fuss started with China. In fact, I expect to see an increase in canola production in our area due to the poor soybean yields from last summer. Canola is a good crop to rotate to after growing cereals such as wheat.”
As for impacts to farmers if the dispute drags on, Ron was of the opinion that other grains and markets will take up the slack. For example, due to the lower hay production for cattle farmers, there is a higher demand for feed crops such as barley, oats, and corn. These commodities are trading above the 10 year averages and farmers were already increasing those acreages. In addition, Ron expects an increase in fall rye and malt barley plantings this year.
But according to Ron, trade disputes over Canadian grains and pulses are nothing new on the world trading scene. India used to import higher quantities of Canadian yellow peas until they imposed a 50 per cent import tariff back in November, 2017. Ironically, China picked up the slack in sales and picked up about 65-70% of Canadian yellow pea exports. But along with canola, those sales are also starting to slow.
As Ron said, ‘You have to remember, China is a major buyer of all grains, not just Canadian canola which is accounting for about 40% of our canola exports. All grain farmers and related Canadian jobs could be affected by the slow down. In the short term, grain is going to be stored longer on the farm and at the elevator. But this grain will have to start moving before next fall’s harvest starts to come in. Farmers can only sit on their full bins for so long before bills start to come due. I am starting to see a trickle of farmers getting squeezed this way. They can only wait so long before they will be forced to sell at a lower price. Farmers do not have the luxury of passing inflationary costs downstream, so if this issue doesn’t resolve in a timely fashion, it’ll be another hit to their bottom line.’
For people interested in the background of Canada’s grain trade, the Canadian Grain Commission has a comprehensive site with all sorts of statistics on the subject. For example, for the 2017/2018 crop year (runs from August to July), China imported 25% of Canada’s total crop exports. The main grains imported were wheat (7%), Barley (91%), Flax (58%), Canola (44%), Peas (67%), and Soybeans (44%). The numbers are the percentage amounts of total Canadian grain exports of each particular commodity. In 2016, canola seed and canola meal exports were worth $2.8 billion (CAN). Obviously, the Chinese market is immense when it comes to the financial well-being of Canadian farmers.
Bringing the economics of canola closer to home, the readership area of the South Mountain Press and Crossroads This Week held a farming area of approximately half a million acres of canola last year which produced about half a million tons of the oilseed. Roughly, the net value of the crop was $250 million (CAD).
As for worries about the quality of Canadian canola, all large Canadian exporters and producers of food such as Richardson International follow the Canadian Food Inspection Agency Hazard Analysis Critical Control Point (HACCP) protocols. The regulatory regime is extremely strict. Each delivery of grain is scrutinized numerous times and if need be, can be individually traced back to the source. Then before export, the Canadian Grain Commission conducts their own licensing and inspection requirements. In fact, even before the cargo ship leaves a Canadian port, the importer has to accept the shipment as satisfactory.
It is obvious that China is promulgating this farce of a canola food safety incident only as a thinly veiled political retaliation to the Huawei executive’s arrest. The practical upshot of the ploy is that it will probably result in the temporary lowering of commodity prices. Frankly, it’s laughable that a country which tried to cover up the lacing of its baby formula with poison would accuse Canada of selling them tainted seed.
But the general consensus from industry is the Chinese government cannot hold up the import of Canadian grains for long. There is too much of a demand from a billion, hungry, Chinese citizens.
Blair is a personification of a ‘Jack of All Trades and Master of None’. He has held several careers and has all the T-shirts. Time to add the title Blogger to the list.