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|Farming - Canadian farmers face canola crisis |
Canola on Bill Knight's farm in Mull, Ont.
Diana Martin/The Canadian Press
Chinese trade barriers appear prompted by health and safety issues, but industry insiders blame protectionism
Paul Waldie and Jessica Leeder
From Thursday's Globe and Mail
Published on Wednesday, Nov. 18, 2009 8:15PM EST
Last updated on Thursday, Nov. 19, 2009 6:54AM EST
The Chinese border is a long way from Canada's Prairie farms.
But the trade war being waged along it has stretched right to the barn doors of thousands of Canadian farmers, who are facing a crisis due to new Chinese restrictions blocking canola from entering one of the world's most sought-after export markets.
The restrictions were imposed this week and have sent government officials scrambling to repair the crucial trade relationship before China begins rejecting the bulk of Canada's $1.3-billion canola exports to the country.
The situation is the latest in a string of unexpected international trade barriers to Canadian grain: Last month, the European Union cut off flaxseed imports from Canada over concerns about contamination from a genetically modified variety, threatening a $320-million market for farmers; India, which accounts for half of Canada's pea exports, restricted imports of yellow peas, sending prices sinking, and the United States has placed four Canadian canola-crushing plants under restriction because of salmonella bacteria in meal shipments used for livestock feed.
On the surface, the barriers appear to be prompted by concerns over health and safety issues, such as blackleg, the fungal disease that has turned the Chinese off Canadian canola. But industry insiders and observers, including Canadian Agricultural Minister Gary Ritz, point to protectionism in recessionary times.
It's a problematic cocktail that only the Prime Minister seems fit to solve. Negotiators from Agriculture Canada, the Canadian Food Inspection Agency and embassy officials failed to persuade Chinese officials earlier this month to bend the rules before instituting the blockade.
“We're hopeful that [Prime Minister] Stephen Harper will raise this when he goes to China,” said JoAnne Buth, president of the Canadian Canola Council.
Until then, a hefty proportion of Canada's 2009 canola crop – which is expected to hit a near-record high of 10 million tonnes, second only to wheat among grains grown nationally – will remain in the balance.
Canola exports to China have been climbing relatively steadily. Last year, Ms. Buth said, Canada was the No. 1 canola exporter to China, with 2.87 million tonnes worth $1.3-billion.
“We do need China as a market force in the long term. We've sent them 10 million tonnes over the last 12 years,” she said, adding that blackleg disease has never infected Chinese oilseeds, nor has presence of it stopped the acceptance of shipments.
“There is a lot of speculation of why this has happened. Part of it might be that we've increased our exports so high that there are concerns about the amount Canada has sent to China,” she said, adding that Chinese officials want to protect their own growers.
China's action is already being felt across the prairies, said Bill Wittal, a Calgary-based agriculture consultant. With one of the largest export markets closed, many elevators have stopped buying canola from farmers and prices for growers have sunk by up to eight per cent.
“Elevators won't take canola because they have more than enough. There's too much inventory,” Mr. Wittal said, adding that the strengthening Canadian dollar could ultimately force canola prices down to maintain competitiveness with other oil seeds.
Mike Jubinville of ProFarmer Canada, a Winnipeg company that tracks commodity prices, said he has been “amazed at the amount of political interference in trade we've seen in the grain industry this fall. It's more than I've ever seen before.”
China's decision to restrict canola imports sent the price of the oil seed tumbling by about $15 a tonne when it was announced a few weeks ago. The price has increased to $404 a tonne because investors and farmers believe the issue will be resolved soon.
But Mr. Jubinville isn't so sure. He said it could take months to sort out, leaving farmers with a glut of canola they can't sell. “The Chinese [canola] crushers want it, we want to sell it, but we have politics in between us. And, that's always a black hole.”
For Kevin Auch, an Alberta farmer who grew 1,800 acres of canola this year, that black hole means recalibrating his hopes of getting a decent price for his crop. He said the trade problem affects “not just this crop that I've got in the bin but next year's too. Canola is basically my number one crop on my farm,” he said. “It's the most profitable crop I have.”