Policy Manager with SaskCanola, Dale Leftwich says the outlook is bleak for Canadian canola producers following a Tuesday announcement that China will be implementing a 75.8 per cent temporary tariff on Canadian canola seed.
The move followed China’s anti-dumping investigation into canola which they claim to have found evidence that Canada has been hurting China’s domestic market by getting “preferential policies” and government subsidies. The new tariff also comes on top of 100 per cent Chinese levies on Canadian canola oil and meal announced earlier this year in March.
Leftwich says China is Canada’s largest customer for seed, so this tariff will have a huge impact on what farmers will be able to sell, as well as what prices they’ll be able to get. Tuesday canola futures were limit-down after the news broke Tuesday.
He acknowledges that the tariff is only preliminary, and is supposed to be reviewed by China in about a month’s time. In the meantime however, producers will still feel the pinch.
“All their plans have been thrown out the window.”
He explains that some farmers have smaller crops than usual this year due to drought, and now they’ll be getting a lower price for it. On the other hand, those with larger crops will have to figure out what to do with it.
“If they were going to sell the canola and pay some bills, and the elevator companies can’t take it in cause they can’t ship it to China, all of a sudden they have to have additional storage. They may have to find another way to store other crops. They may have so sell other crops…It changes everything in terms of how they’re going to pay their bills, what crops they’re going to have to sell, how they’re going to store this.”
And to make matters worse, harvest is right around the corner.
Leftwich says SaskCanola is lobbying the federal government to right this situation through negotiation. He explains that SaskCanola has looked through the numbers, and there is no reason for ani-dumping tariffs on Canadian canola.
Although there are programs in place such as crop insurance and AgriStability in place, Leftwich says none of them are robust enough to deal with a trade dispute of this magnitude. Further, he says solving the problem is more important than issuing financial aid, anyway.
To fill the void of Canadian canola products, he suspects China will look to Australia, however they may not need to for a while, as they stockpiled large amounts of Canadian product when the prices dropped last fall.
“When they put the initial trade dispute in play last fall, the price dropped, and people were worried about the market at that point. What the Chinese did, instead, is buy even more canola over the winter and into the spring.”
He says how much canola they have stored up is anyone’s guess, and they may even try to get ahold of Canadian canola through other outlets, such as Dubai, in order to sustain their crushing facilities.
