Canola growers caught in middle as Canada-China relations sour

Toban Dyck picked the right crops this year — by accident.

Instead of seeding canola, the Winkler, Man., farmer is seeding wheat and soybeans. The pick was purely coincidental — he didn’t know when he bought his seed in the fall that a dispute with China would mean big problems for Canadian canola producers.

“Often these kinds of trade disruptions can last for years. I hope it’s not the case,” Dyck says.

China is the biggest buyer of Canadian canola, purchasing nearly 40 per cent of the crop grown here.

Now the country has effectively blocked that trade. The move is likely a response to Canada’s arrest of Huawei executive Meng Wanzhou. Her extradition process to the U.S. could take years, which has farmers worrying the canola blockade could last just as long.

“China’s a big giant player,” Dyck says, adding “China is a giant wild card.”

Canola is one of the biggest agricultural products in Canada, and if the spat with China lingers, the impact on the economy could be huge:

• Canada is the No. 1 producer and exporter of canola in the world.
• Canadian farmers grew 23 million acres of canola last year.
• The crop contributes more than $26 billion a year to the economy, according to Statistics Canada.

Then there are the jobs: the crop is responsible for employing 249,000 Canadians and $12.5 billion in wages, according to the Canadian Agri-Food Trade Alliance.

Already, the impact of the Chinese canola embargo is being felt here. This year farmers are planting 1.5 million fewer acres than they did in 2018, according to Jack Froese, a farmer and board member of the Manitoba Canola Growers.

That’s the equivalent to almost the entire land area of PEI being changed to another crop.

If this dispute drags past the fall, Froese says he expects there will be even less canola seeded next year.

“We’ll certainly be putting a lot less canola in, that’s for sure,” he says, noting that the price of canola has gone down $2 per bushel since last fall.

“At average yields, it’s break-even at best.”

U.S. tariffs

There’s also the added factor of trade tensions between China and the U.S. that could soon cause even more pain for Canada’s agricultural sector.

China largely stopped buying U.S. soybeans last year over a trade dispute, which has contributed to a depression of many crop markets, says Froese. As prices have dropped, the weak Canadian dollar has been an unexpected silver lining for farmers here, making Canadian produce more attractive to international buyers.

“Well, we in Canada are somewhat fortunate,” Froese says. “We’ve had the Canadian dollar at 75 cents and it’s kind of saved us. But the guys in the U.S. are eating into equity and have been for probably a year or two.”

But the U.S. and China are trying to negotiate a new trade deal that would cut the tariffs the nations have placed on each others’ goods, and that could negatively affect Canada, according to Sylvain Charlebois, food distribution and policy professor at Dalhousie University.

“Tariffs may drop between the two countries, which could make some commodities — American economy commodities — more attractive to China. Which means they could actually implement more embargoes against Canada, and I can see [products such as] lobster being affected,” he says.

Besides seafood, Charlebois says other markets could become targets too, such as Canadian beef sales to China.

Taking a hit

In the meantime, even though Dyck isn’t planting canola this year, it doesn’t mean China’s shift away from buying it isn’t affecting him. He’s still holding some of his canola harvest from last year.

Normally this would have been a smart move financially. If producers can hold their crop beyond harvest-time, the price they can fetch for it usually goes up as supply diminishes.

This year, however, holding onto part of the harvest is working against them.

Dyck says he has already taken a financial hit on the canola he was trying to save. “I could have secured contract for June-to-August pick-up of this canola for $13.25 per bushel.”

But now that China has backed off Canadian canola, he says the selling price is about $11.50.

It would not be unusual for farmers to have 100,000 bushels of grain in their bins, meaning the drop represents a $200,000 hit to a small business’ bottom line.