China ends Canadian canola ban
Move comes amid global shortage of cooking oils
China ended a three-year ban on Canadian canola, suggesting extreme shortages for cooking oils are forcing Xi Jinping’s government to reconsider some of its geopolitical grudges.
Trade Minister Mary Ng and Agriculture Minister Marie-claude Bibeau issued a short statement late Wednesday that said two major players in Canada’s canola industry had been given permission to resume exporting to the world’s second-biggest economy.
“We welcome this decision to remove the restrictions and immediately reinstate the two companies to allow them to export Canadian canola seeds,” Ng and Bibeau said.
“We will continue to work with Canadian canola farmers, businesses, exporters, and their communities to defend their interests and support their success at home and in markets abroad, including China.”
Two of Canada’s biggest agriculture companies, Winnipeg-based Richardson International Ltd. and Reginabased Viterra Inc., have been banned from shipping canola to China since 2019, when they found themselves entangled in geopolitical gamesmanship between China and allies of the United States.
China’s move to block the viewed as retaliation for Canada’s arrest of Meng Wanzhou, an executive at the Chinese telecom giant Huawei Technologies Co., on behalf of U.S. authorities. China also arrested Canadians Michael Kovrig and Michael Spavor around that time, leaving them in prison until the U.S. dropped its extradition request for Meng in September 2021.
TIMING NOTED
After more than three years, the sudden move to reopen its doors to Richardson and Viterra suggests the ongoing troubles in the global market for vegetable oil may have forced China’s hand.
“Let’s put it this way: It’s interesting timing,” said Ted Bilyea, a distinguished fellow at the Canadian Agri-food Policy Institute and former president of international business at Maple Leaf Foods Inc., the Torontobased processor of poultry and pork.
“I would have some thought that China is reconsidering its food security position because we have a lot of turmoil in the oils market.”
Indonesia, the world’s top palm oil exporter, banned exports last month, though the country signalled on May 19 that it will ease the ban toward the end of the month. On top of the issues in palm oil supply, the war in Ukraine has squelched access to the region’s crucial source of sunflower oil. Meanwhile, canola oil supply is tight due to last summer’s drought on the Prairies, which choked Canada’s canola production. A drought in South America is doing the same to soy.
“You’ve got problems in all the four big oils,” Bilyea said.
“It’s an interesting time for China to decide it’s OK.”
Viterra celebrated the end of restrictions this week as “good news for our entire industry, particularly our farmers who have experienced a variety of significant challenges over the last couple of years.”
“We are pleased by the decision to remove restrictions and allow Viterra to resume exports of Canadian canola seed into China,” the company said in a statement.
But there doesn’t appear to be all that much canola left to ship at the moment. Last summer’s drought in Western Canada cut crop yields so badly that, as of the end of March, national canola stocks were at the lowest they’ve been in 17 years, according to Statistics Canada. The shortage has had a knock-on effect on exports, which as of March had dropped to a level not seen since 2008 “despite strong global demand for canola,” Statistics Canada said.
EXPORT PICTURE
The way Canada’s exports are spread across the world has changed in the last three years, after the Chinese restrictions created a multibillion-dollar hole. Exports to China, worth $2.8 billion in 2018, dropped to $800 million in 2019, $1.4 billion in 2020, and $1.8 billion in 2021, according to the Canola Council of Canada.
“I think that we are being caught in the middle of a much larger dispute,” Jean-marc Ruest, Richardson’s senior vice-president of global affairs and general counsel, said in 2019, shortly after China started blocking the company’s canola.
“It’s a significant part of our business and obviously we’ll have to find other outlets for our product.”
Exporters appear to have eventually succeeded in finding new buyers, after taking an initial hit from losing direct access to the Chinese market.
The value of canola exports had reached a record of $1.8 billion in the first quarter of 2017, averaged about $1.4 billion in 2018 and then about $1 billion in 2019 before climbing back to a quarterly average of $1.5 billion in 2020, as commodity prices surged during the pandemic.
Canola exports reached a new peak of $1.83 billion in the first quarter of 2021, and averaged $1.6 billion over the rest of the year.
It’s unclear whether renewed access to the Chinese market for canola farmers signals a thawing of relations between Xi and Prime Minister Justin Trudeau’s government, as Russia’s invasion of Ukraine appears to have strengthened the resolve of democratic powers such as the U.S. and Germany to push back against the aggression of autocratic regimes.
About 24 hours after the canola announcement, the federal government was to announce that it had decided to ban Canadian telecommunications companies from using Huawei technology in their 5G networks.