Canola prices have taken a hit in the wake of China’s decision to block certain Canadian imports, a move that has created a logistical headache for exporters reliant on the key overseas market.
China’s foreign ministry said Wednesday that it is blocking imports from Richardson International Ltd. — one of Canada’s largest grain producers — due to fears of insect infestation, a day after the company confirmed its import permit had been revoked.
Some have suggested the block may be the latest swipe against the Canadian government for arresting a top Chinese tech executive.
“We’ve seen a huge drop off in canola prices, especially over the past couple of weeks,” said Bruce Burnett, director of weather and markets at Glacier FarmMedia.
He called it a major drop for the commodity, which likely wouldn’t have happened without the backdrop of a deteriorating relationship between China and Canada. The fallout follows the arrest of Chinese tech giant Huawei CFO Meng Wanzhou in Vancouver on Dec. 1, 2018.
On Dec. 3, the May futures contract, which he noted was not the most actively traded at the time, closed at $496 per tonne. Wednesday afternoon, it was trading at about $456 — a roughly eight per cent drop. Exports to China had previously been expected to remain strong through most of the crop year, he said, with fairly solid prices.
Canada supplies about 40 per cent of China’s canola imports. Canada exported about $3.6 billion worth of canola seed, oil and meal to China in 2017, according to the Canola Council of Canada’s most recent figures.
The two countries have generally had a good relationship, said Brian Innes, vice-president of public affairs for the council, with Canada sending a stable supply of a high-quality product to feed growing Chinese demand, in part to feed its livestock. But issues like this latest permit revocation arise from time to time, he said.
“It’s a concern for the whole industry because it injects uncertainty into the market,” said Innes.
That sentiment makes it difficult for everyone in the supply chain and industry to make decisions as they’re thinking about the future, he said. Farmers, for example, would be concerned about when they’ll sell their current canola stores and what they’ll grow in the upcoming season.
“So, all members of the canola value chain are paying very close attention because China’s a very important market for Canada.”
Now that China has blocked Richardson’s shipments, the question becomes: what will happen to other companies, Burnett said.
It’s possible others could have their permits revoked. But, unlike Winnipeg-based Richardson, other players in Canada tend to be part of large multinational organizations. Regina-based Viterra Inc., for example, is part of Switzerland-based Glencore International.
While it’s hard to gauge what the Chinese government is thinking, it’s likely these companies will be very cautious, he said.
“There’s large amounts of money involved here that the companies will be very wary of shipping cargoes that could be rejected or that type of thing.”
They could try to turn to other markets that import Canadian canola, said Burnett, such as parts of Southeast Asia.
“Can they wholly replace the demand that China represents?” he said. “That’s probably a hard thing to happen.”
Al Mussel, research lead and founder of Agri-Food Economic Systems Inc., said it’s a convenient time for China to decrease the amount of canola it imports because the country is grappling with an outbreak of African Swine Fever, a fatal disease that targets pigs.
That means China doesn’t need as much canola to feed its pig herd, said Mussell, adding that some estimate the country will drop its pork production by up to 20 per cent this year.
Rick White, CEO of the Canadian Canola Growers Association, said the lower commodity price and blockage of some exports could have a detrimental impact on farmers.
He was hopeful the two countries will work out a solution within a month or so, before the situation creates long-term effects such as farmers growing less canola or locking in this year’s crop at the current low price.
“If they have legitimate concerns, let’s talk about them,” he said. “If they’re not legitimate concerns, then let’s figure out a way to get back on track and get the canola going there again.”
Alberta Premier Rachel Notley issued a statement calling on Prime Minister Justin Trudeau to “fight” for canola farmers and related jobs.
“We are calling on Ottawa to stop its navel-gazing about its internal controversies and fight back,” she said, adding Alberta farmers and workers could lose hundreds of millions of dollars and up to 3,000 jobs if the issue is not resolved.
Foreign Affairs Minister Chrystia Freeland expressed concern about the situation on Tuesday and said the government is “working very, very hard with the Chinese government on this issue.”
— With files from The Associated Press
Follow @AleksSagan on Twitter.
Aleksandra Sagan, The Canadian Press
Governments earned $186M in pot taxes in 5 1/2 months of legalization: StatCan
Federal and provincial governments earned $186 million in cannabis-related revenue in the first five-and-a-half months since legalization in October, Statistics Canada said Wednesday.
The Ottawa-based agency said revenue came from product-specific excise taxes and general taxes on goods and services, such as the Harmonized Sales Tax, directly related to the sale of cannabis.
The federal government drew $19 million in excise taxes, while provincial governments got $79 million from excise taxes and related adjustments.
Statistics Canada says revenues from general taxes on goods and services brought in an additional $36 million at the federal level and $53 million via direct provincial general taxes on goods and services.
It added that excise taxes increased by 12.4 per cent in the first quarter of 2019 compared with the fourth quarter of 2018 on higher sales by licensed producers to distributors.
During the same time frame, general taxes on goods and services from the sale of cannabis were up 68.1 per cent from increased purchases made by households.
“Federal and provincial government revenue from general taxes on goods and services as well as excise taxes may rise further in the second half of the year, as additional cannabis retail outlets are scheduled to open,” Statistics Canada said in a release.
These figures are the first glimpse into pot-related government revenues since Canada legalized cannabis for recreational use on October 17.
Due to the “bumpy” rollout of legalization last fall, these first-ever government tax figures are lower than expected, said the Conference Board of Canada’s economist Robyn Gibbard.
“However, we think that as the kinks are worked out, governments can expect strong growth in revenues from cannabis sales going forward,” she said in a statement.
Legalization on Oct. 17 was met with brisk demand from Canadian consumers and supply shortages at government and private retailers, prompting some to reduce their hours of operation or provincial governments to cap the number of retail licences.
The supply situation has improved in recent months, and Alberta has lifted the moratorium on new retail licenses and Quebec cannabis outlets have resumed more normal hours.
Still, household spending figures from Statistics Canada for the first-quarter of this year show that most non-medical cannabis is purchased from the illicit market, at $1.1 billion, compared to $377 million bought through legal channels.
Armina Ligaya, The Canadian Press
PM worries China could target more Canadian goods as fears about soybeans rise
OTTAWA — Prime Minister Justin Trudeau says he’s worried an ongoing diplomatic dispute could see China target imports of other Canadian agricultural products as concerns grow about soybean shipments in particular.
One industry leader said Thursday that, without a clear explanation, Canadian soybean exports to China plunged suddenly from 3.2 million tons over the final four months of 2018 to just 3,700 tons through the first four months of this year.
Relations between Canada and China have deteriorated since the December arrest in Vancouver of Huawei senior executive Meng Wanzhou at the behest of the United States.
China was outraged by Meng’s arrest and has since detained two Canadians on allegations of espionage and sentenced two other Canadians to death for drug-related convictions.
Chinese authorities have also blocked imports of Canadian canola seeds, alleging they found pests in shipments, and have increased inspections and paperwork related to pork.
“When it comes to China, obviously, our top concern is the release of Canadians who are detained in an arbitrary way by the Chinese for political reasons,” Trudeau said in French on Thursday during a visit to France, where he marked the 75th anniversary of D-Day. “We are also concerned by their actions on canola and the potential of other actions on other products.”
Trudeau told reporters that he will see if it’s “appropriate or desirable” to have a conversation directly with Chinese President Xi Jinping about a number of bilateral difficulties later this month at the G20 summit in Japan.
Later Thursday, Agriculture Minister Marie-Claude Bibeau told a parliamentary committee that she’s heard concerns about shipments of Canadian soybeans to China.
Ron Davidson, executive director of Soy Canada, said in an interview that China’s purchases of Canadian soybeans collapsed at the end of last year following a run of very strong exports.
“It’s not a slowdown — it’s a virtual halt,” said Davidson, whose members have reported the drop to Bibeau. “We can see what’s happening, but we aren’t certain why.”
He said it’s not unusual to see soybean exports decrease during winter months, but the speed, magnitude and timing of the crash this time around has alarmed the industry.
Davidson said he’s received reports of Canadian soybean containers held up in Chinese ports for longer than usual as authorities there conduct additional tests. It’s possible, he added, that the drop is partly due to an increased reliance by China on soybeans from other parts of the world.
Soybeans are Canada’s third-most valuable agricultural export after canola and wheat, he said.
Any prolonged crackdown by Canada’s second-biggest trading partner on shipments of key products like soybeans and canola could deliver a blow to the national economy.
New data released Thursday from Statistics Canada showed overall exports of canola fell 14.7 per cent in April after China started turning away Canadian canola seed.
Conservative Leader Andrew Scheer’s spokesman said it’s not enough for Trudeau to be concerned because he’s not a casual observer when it comes to the dispute with China.
“He needs to actually do something,” Brock Harrison wrote in an email Thursday.
“Mr. Scheer has on several occasions urged him to take concrete steps to respond to China’s actions against Canada and send a message that Canada won’t be pushed around. He has refused to act.”
The federal government says it has tried unsuccessfully to send a delegation of inspectors to China to examine Chinese evidence of pests in canola shipments. Canada has also been unable to schedule high-level engagements on the matter despite multiple efforts.
Bibeau told MPs Thursday that Canadian scientists finally had a conversation Wednesday night with Chinese customs officials about their canola concerns.
“They agreed to have more sustained discussions, telephone conferences on the subject — and they did not close the door to the delegation,” she said. “We are still asking for that, but the conversation has been re-activated and yesterday we could feel that we were at a different level … This is encouraging.”
Earlier this week, China’s ambassador to Canada said in an interview that Chinese officials investigated Canadian canola based on regulatory and scientific principles, and provided “concrete” documents to Canada to justify their concerns.
Lu Shaye added that the relevant Chinese departments no longer maintained contact with their Canadian counterparts, suggesting the matter was closed.
—Follow @AndyBlatchford on Twitter
Andy Blatchford, The Canadian Press
Open Studio Tour This Weekend!
Can you help police identify these attempted murder suspects?
Indigenous drummers lead pipeline protesters on 22-kilometre march in Victoria
Parents of soldier killed in parachute exercise ask for thorough investigation
Alberta Sports Hall of Fame and Museum14 hours ago
Alberta Sports Hall of Fame Class of 2019: Kreg Llewellyn, Waterskiing Athlete
Crime2 days ago
Crime Beat with Global News Crime Reporter Nancy Hixt
National1 day ago
Six-year-old girl injured after falling off float in Alberta parade
National2 days ago
More assertive Independent senators come close to defeating government bills
Travel16 hours ago
Todayville Travel: A ‘soft egg’ in the Nahanni Pt. 1
National2 days ago
Canadian astronaut David Saint-Jacques set to return after more than six months in space
Community1 day ago
Mayor invites everyone to the annual Garden Party
National1 day ago
Mysterious $100 bill, life-affirming note delights Nova Scotia town