Canada's China canola conundrum and its impact on Alberta farmers
The general consensus among local farmers seems to be to lock up their bins with canola in hopes of better commodity pricing this fall. However, China's current anti-dumping investigation into Canadian canola seed imports has already had a direct impact on local farmer's pockets.
When the investigation was first announced on Sept. 3, the global benchmark price for canola seed, ICE canola futures, fell by more than six per cent.
"Just the threat of it has dropped our prices by at least $1.50," said Ken Leinweber, who farms just north of Rocky View County in both Kneehill and Mountain View County.
He said about 25 to 30 per cent of his crop land is seeded with canola, a crop that already suffered this year due to the weather. With the lack of rain and a hot July, Leinweber said most farmers were already be looking at a lower income to start with.
"I would say everyone's down at least two thirds of a crop, maybe some at half a crop of normal," Leinweber said.
A seed grower in northern Rocky View County, Paul Wiebe, echoed that most farmers are already frustrated with the dry conditions and what's coming off the field.
"Not only are you going to harvest half of a crop, your commodities are now going way down as well; so it's kind of a double hit," Wiebe said. "As a price taker, it makes you want to just lock the bin door."
It wasn't long ago that China barred canola seed imports from two major Canadian companies in 2019, but Leinweber said it didn't change the amount of canola he seeded in the following years. He said the ban negatively impacted prices, but farmers still sold their canola into different markets to supply the global demand.
"Eventually it bounces back on again, but it takes a while," Leinweber said. "China is a huge player and they affect the price, especially short term. But they still have to buy from somebody."
While markets stabilize over time, Leinweber said Canadian farmers still suffer as it takes money out of their pockets.
"I definitely remember taking a hit because of [the ban in 2019] and how much that cost us," he added. "Short term, it definitely hurt us, and it took a couple years before it bounced back because it takes a while to get those other markets in place after you lose a certain market."
Wiebe noted that after about two years, people kind of forgot that the ban was on, and Canada began using more of its own canola and exporting less.
"Canada did do well as a result of that," Wiebe said. He added that despite what China is doing now, a better offer will have to come along before farmers open up their bin doors.
While farmers like Leinweber and Wiebe can store their canola in the hopes of selling at a better price, it does cost money, increases the risk of spoiling the crop, and could prevent them from paying their bills.
"There's a downside to storing it, but people still will store just hoping to get a higher price in the future, which is probably what a lot of people are going to do this year," Leinweber said.
Wiebe added that a lot of farmers are leaning on an insurance payout due to the poor weather conditions for canola this summer. He said the insured price of canola is higher than the current market price, which could result in a good payout as he waits to sell his canola.
Canada produces about 20 million tonnes of canola annually, and, according to industry statistics, the bulk of it was grown in the western provinces of Alberta, Saskatchewan, and Manitoba.
Best known for its brilliant yellow flower, canola is in demand around the world because of its usefulness as a livestock feed, cooking oil or biofuel. It is one of the most widely grown crops in Canada, generating about one-quarter of all crop revenues on Canadian farms.
The China Conundrum
China has historically been the biggest buyer of Canadian canola seed, and was expected to purchase about 70 per cent of Canada's canola shipments this year, according to Statistics Canada.
China's move to target canola comes in response to Canada's plan to impose tariffs on Chinese-made electric vehicles, steel and aluminum. China then accused Canada of undercutting its export price on canola to get an unfair market advantage, a process known as dumping.
Canadian canola is not currently being prevented from entering the country but on Sept. 9, China's Ministry of Commerce (MOFCOM) formally announced its Notice of Initiation of an anti-dumping investigation into imports of Canadian canola seed. The first step is a dumping investigation looking at all of 2023, as well as an industry injury investigation period from Jan. 1, 2021, to Dec. 31, 2023.
In 2019, China barred canola seed imports amid heightened tensions between the two countries following the Canadian detention of Huawei executive Meng Wanzhou at the request of the United States.
"It seems like the canola producers lately have been taking the hit for a lot of our political agenda," Leinweber said, noting that's a frustration many farmers have. Wiebe added that farmers are not only frustrated with growing canola due to dry conditions, but also because people who don't have anything to do with canola can affect the price.
Chris Davison, president and CEO of the Canola Council of Canada (CCC) said ongoing assessments will be required to determine the various impacts of the investigation on Canadian canola.
"We are engaged and in close communication with government officials regarding the implications of the investigation and Canada's participation and response to it, including the need for a coordinated approach and support for the Canadian canola industry," Davison said.
-With notes from Amanda Stephenson, The Canadian Press.
