Canada’s Canola Gets a Reprieve with China, Which Remains an Important Market

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Sometimes images are powerful. I felt that way this past week when I saw Prime Minister Trudeau and his wife and young daughter board a plane to China.  He is just another Prime Minister who is heading to the world’s biggest fastest-growing economy trying to put Canada’s best foot forward.  As a trading nation, the United States will always be our main squeeze.  However, as all farmers know, China has a voracious appetite for North American agricultural commodities.  This week, among other things Prime Minister Trudeau was in China trying to ensure Western Canadian canola producers maintain their Chinese market.

The fight over canola has to do with the amount of dockage in canola shipments sent to China.  This has been going on for quite some time and the Chinese wanted a change and were threatening a September 1 deadline for those dockage changes.  Prime Minister Trudeau and his delegation managed to get that negotiated away with Canadian and Chinese negotiations set to continue.  It was a victory for Western Canadian farmers with canola ready to be harvested in the fields.  There will be much negotiation ahead, as I’m sure our Chinese friends still want canola with lower dockage.

There was also a very small political aspect to this.  Western Canada has not been friendly to her Liberals over the last 30 years.  Canadian International trade minister Chrystia Freeland, who represents the riding of University Rosedale is the daughter of a canola growers in Peace River Alberta.  She made it very clear while in China that Canadian canola producers would be remembered.  I don’t think that will change the optics of rural politics in Western Canada, but I am certain that it was a welcome refrain to many.

Simply put, China is a very important market, not only to Canadian agriculture but greater North American agriculture as a whole.  At the present time the US economy is about 1.6 times bigger than the Chinese economy in terms of GDP.  With a Chinese economy growth rate of approximately 6.5% and an American growth rate of approximately 2%, we might be looking at the Chinese overtaking the Americans sometime after 2026.  However, that is a long time in the future and we really have no way of knowing how geopolitics will play out as well as the effect of new technology.  Needless to say, we need our Chinese friends to continue to buy agricultural commodities.

Years ago I would often write in these pages about the impact that Asia was having on our agricultural economy.  I can talk about numbers all you want, but what you really have to do is take a flight to Asia and walk the streets and talk to the people.  Look around and you will understand Asia is an exploding economy compared to here.  When I walked the streets of Bangladesh, Singapore and Hong Kong, you can simply feel the pressure.  China is simply the largest part of that economy followed by India, which are now taking their place within the global economic marketplace.   Agricultural commodities like Canadian canola and American soybeans are well placed to capture large parts of those markets.

Of course, Asia really doesn’t have a long peaceful history.  North Korea is a reminder of that everyday.  However, we hope that those problems are behind us even though the South China Sea is an increasing irritant among East Asian Nations. Despite that, the Prime Minister announced the China and Canada would be looking into a feasibility study on an eventual free trade agreement between the two nations.  It was pointed out that environmental and labor issues get in the way of that now.  However, it is quite a thing to have a Canadian Prime Minister and the Chinese premier openly musing about such an agreement.  It would certainly be years away.

There is a lot of competition for this Chinese demand.  If you look closely at a map the Chinese population is mainly in the southeast and eastern part of the country.  Much of the country is not productive for food production.    However, they still produce massive amounts of food to feed their populations of 1.3 billion people.  Commodities are needed aside from this and areas in Africa are ripe to step up to supply them.  Canada being an already developed supplier gives us many advantages.

Still, here on my farm, this Asia demand thing is just a theory, even though every one of my soybeans ends up there.  Ditto for Canadian canola farmers alone on the prairie.  What you really need to do if you are able is to visit China, India or other parts of Asia.  See for yourself what pent up demand looks like.  Feel the pressure on the streets as people jostle for room, but then stop to eat.  It will change you forever and our farms will look differently when you get back.

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