Canadian farm organizations have been making the case for better business risk management programs, and with margins getting tighter, they may be justified. But farm leaders should ask for the right reasons, and they shouldn’t include market access problems or being caught in a trade war, especially when export demand has never been better.
Hardly an industry speech goes by without a reference to the importance of agriculture to the national economy. So when agriculture makes it to the national news, which it did big time when China reportedly suspended canola purchases from two Canadian suppliers, farm organizations were eager to take advantage of the opportunity to have agriculture on the front page and create the impression that farmers were in big trouble.
A little too ready. You would think from all the reporting, including in the farm press, that China had completely suspended purchases of canola or even of Canadian grain altogether. Farm organizations fired off requests for assistance, and the federal government quickly responded by increasing cash advance limits not just on canola but on all grains and oilseeds. Opposition parties continued to hammer the government for not doing more to resolve this apparent crisis of sales to China.
Some crisis. The Canadian Grain Commission reports that as of the end of May (the most recent figures available) with two months left in the crop year, China had imported 10.37 million tonnes of grains and oilseeds, 1.5 million tonnes ahead of the same time last year. Wheat imports were at 1.85 million tonnes, up by 800,000. Soybean imports more than doubled to 3.06 million tonnes. “Embargoed” canola imports were at 3.07 million tonnes, down only 15 per cent from the same time last year. Total canola exports to all countries were down only 10 per cent.
As for any stoppage due to the arrest of the Huawei executive late last year, China imported 112,000 tonnes of canola in May and a total of 935,000 tonnes since January 1.
Regarding the apparent need for cash advances on unsold grain, producer deliveries as of July 7 were almost 55 million tonnes, four million tonnes ahead of last year. Exports were a whopping 42.3 million tonnes, 2.6 million ahead of last year and already higher than the 2017-18 record total — with three weeks left to go in the crop year.
Prices may be another matter. But while export performance could hardly be any better, farm organizations are talking as if grain is backed up on the farm because we’re stuck in a trade war.
Before reacting so quickly to China’s action against only two of the several exporters of Canadian canola, It would have been better to pay attention to the single largest event the grain trade has seen in recent years, which was the outbreak of African swine flu in China’s hog herd. USDA estimates that will cut China’s oilseed imports by 10 million tonnes and coarse grain imports by four million tonnes this year.
It would be hard to imagine this not having a similar effect on canola. So since it had to trim imports anyway, China obviously took the opportunity to let it be known that it was suspending purchases from Canadian companies James Richardson and Viterra to create the impression that it was retaliating for the arrest of the Huawei executive. Farm organizations, politicians and media took the bait. But while talk of the “canola import ban” continued, the Chinese just kept buying and hoodwinked farmers, governments and media into believing they weren’t.
The Chinese have never said they have banned all imports of Canadian canola. Yet some politicians have even suggested Canada retaliate with tariffs or restrictions on Chinese goods. Imagine how that would look if we imposed them and the Chinese responded by pointing out that they’ve been buying near-record amounts of grains and oilseeds.
Meanwhile, although the threat has eased with recent rains, there was a real crisis brewing — drought across much of the Prairies, making it doubtful that Canada would be able to ship as much canola to China anyway.
If there were a drought, farmers might really need help from government, so farm organizations should keep their powder dry and only ask assistance for real problems. Record exports are not a problem.