[Updated May 10, 2017] With Canadian softwood lumber and dairy already in President Donald Trump’s crosshairs, there are fears United States could soon go after Canadian wheat.
The Americans have long complained Canadian wheat has enjoyed unfettered access to the U.S. market under the North American Free Trade Agreement (NAFTA), but charge Canadian regulations discriminate against American wheat shipped to Canada.
Canada’s grain sector agrees. And with the U.S. being one of Canada’s best wheat markets, has been calling on the federal government for changes.
The previous Conservative government was close to doing just that through amendments to the Canada Grain Act, but two separate bills, including the last one, C-48, died before being passed.
Now Canada’s grain industry says ending the irritant should be a top priority given Trump’s bellicose, anti-trade rhetoric and a recent U.S. Senate resolution, which could soon land on Trump’s desk.
Last week Montana Democratic Senator John Tester moved a resolution stating Canada should grade Canadian and American wheat the same way and that the president should examine whether Canada’s grading laws adhere to trade agreements and “insist on full access for United States exporters of wheat to the Canadian market.”
“We should be changing the act to allow that to happen,” Cereals Canada president Cam Dahl said in an interview April 27.
The Canadian Grain Commission (CGC) agrees American wheat delivered to a Canadian elevator is treated differently than Canadian, but says it doesn’t prevent commerce.
That might be so, but Canada’s grain trade says to maintain trade harmony the Canada Grain Act must be amended so American-produced wheat, registered to be grown in Canada, can be graded the same as Canadian wheat.
Currently American wheat sold in Canada is only eligible for the lowest grade for the class it is entering, Remi Gosselin, the Canadian Grain Commission’s (CGC) manager of corporate information, said in an interview April 26.
“However, U.S. grain can be delivered and sold in Canada outside the statutory grading system (based on specifications) without restricting its value or use,” he added. “It’s up to the Canadian grain buyers as to how they want to settle such a delivery.
“So there’s nothing in the current (Canadian) grain-handling system that prevents U.S. producers from entering into contracts with grain-handling companies or processors located in Canada to get a fair price for the quality of the product being delivered on the basis of specs.”
Canada’s agriculture minister Lawrence MacAulay echoed those comments in an email May 9.
“Canada’s grain grading system does not prohibit U.S. producers from contracting with Canadian grain companies and receiving fair value for their product,” he wrote. “There is nothing in the current grain handling system preventing U.S. producers from entering into contracts with grain handling companies or processors located in Canada to get a fair price for the quality of product being delivered.”
MacAulay went on to emphasize the important trade relationship between the U.S. and Canada, including agricultural trade worth $50 billion a year.
“We are well aware of the importance of this relationship to our agricultural sector,” he wrote without stating whether the grain act would be amended to address American complaints.
Nevertheless, Canada’s grain trade says to maintain trade harmony American-grown wheat should be accommodated.
The list of American wheats registered in Canada and assigned to a Canadian wheat class, is growing and includes varieties such as Prosper, Faller, and Elgin ND. More are expected to be registered in coming years.
American wheat entering a Canadian licensed primary or terminal elevator doesn’t have to be segregated, Gosselin said. But there’s a caveat. If Canadian and foreign grain are mixed when loaded on a ship, the CGC must take an official sample, inspect and weigh the grain and certify it is of mixed Canadian and foreign grain origin.
As a result Canadian buyers of American wheat might opt to segregate American wheat to be eligible for a CGC grade.
“But that shouldn’t stop commerce from happening really,” Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA) said in an interview. “It’s just a different process you have to go through.”
Not being able to get an official CGC grade adds cost and puts American wheat at a competitive disadvantage, Ben Conner, manager of policy for U.S. Wheat Associates, said in an interview April 27.
“All we are asking for is equity at border,” he said.
“There is some (wheat) sold on specs, but that’s not good enough.”
The WGEA, which represents Western Canada’s major grain companies, also supports amending the act to accommodate American wheat, Sobkowich said.
“But we still think that Canada has the right to set its own grading system and that should remain,” he said. “Both Canadian and American farmers should have access to the Canadian grading system and the (previously proposed) amendment would give them that right.”
Unregistered wheat grown in Canada by Canadian farmers is also only eligible for the lowest grade in the class.
The Western Canadian Wheat Growers Association has been pushing the federal government for several years to change the act. It issued a press release last week, pointing to Trump’s anti-trade threats, urging the Canadian government to “harmonize regulations and ensure the free flow of wheat between Canada and the United States.”
The U.S. is one of Canada’s best wheat customers, Dahl said. Canada has made a lot of changes to accommodate American wheat and CGC grading is the last irritant to be fixed, he said.
But even then, Dahl doesn’t expect much U.S. wheat to flow north.
“If you’re a North Dakota farmer looking at a Manitoba elevator with the Canadian dollar it is not that attractive right now,” he said.
“I would think there would have to be closer parity in the exchange rate. I think that’s a much bigger factor.”
But according to Conner there have been times when North Dakota farmers could earn more selling their wheat in Canada.
“It has been a concern that they haven’t been able to take advantage because of the policies in Canada on imported grain,” he said.
CGC grading would be a step in the right direction, but the U.S. won’t be satisfied until the rules that encourage buyers to segregate American wheat are removed, he said.
Agriculture Minister Lawrence MacAulay’s office didn’t provide a response when asked to comment on the issue.
When asked a year ago MacAulay replied: “The Government of Canada is looking at what changes may be needed in the grain sector to better align it with a changing market. We are listening to stakeholders and partners. We will consider their interests, and how best to address them, while maintaining the protections and assurances the Canada Grain Act provides to Canadian producers and their customers.”
*Update added comments from federal agriculture minister Lawrence MacAulay.