Canada Markets

Canadians are finding out quickly that the cost of exporting our values to the rest of the world, or "virtue signaling" as one Calgary columnist called it, while doing it on a public forum like Twitter, can be a costly move. This follows a move by the Canadian government to scold Saudi Arabia over the arrest and imprisonment of human rights leaders in that country, which quickly led Saudi Arabia to order Canada's ambassador out of the country while the Saudi ambassador to Canada was sent home.

The TSX equity index fell 134 points on Tuesday, despite gains realized in United States markets, with reports that an international seller was largely behind the move. This is speculated to be tied to a directive from the Saudi government for their Central Bank and state-owned pension funds to divest of Canadian equities and bonds, at any cost. The country has ordered flights to Canada to end, ordering some 16,000 Saudi students in Canada to return home after cancelling their scholarships, and has ordered an end to new investment and trade with Canada.

Canadian agriculture is making headlines in this row on Wednesday, with Saudi Arabia said to be stopping all purchases of Canadian wheat and barley. As seen on the attached graphic, Canada has exported wheat and barley to Saudi Arabia in three of the past five crop years (2013/14 to 2017/18, with data covering the first 11 months of 2017/18). Over this period, wheat exports have averaged 227,420 metric tons, while the same period led to an average of 64,820 mt of barley exported.

In the first 11 months of the 2017/18 crop year (August through June), the Canadian Grain Commission reports no exports of wheat and barley to Saudi Arabia, although the Exports of Grain and Wheat Flour report points to 58,600 mt of soybeans shipped, while Statistics Canada tables point to 3,162 mt of lentils shipped. At the same time, industry officials viewed potential for the crop year ahead, with production shortfalls seen in both Europe and the Black Sea region creating opportunity.

In the highly competitive global grain trade, there is often someone ready to eat your lunch. Dow Jones has already commented in a segment titled "Saudi Arabia's Canada Snub could be the U.S. Wheat Farmer's Gain." They quote a Commerzbank spokesperson who states, "Canada offers one of the few glimmers of hope for the increasingly tight global wheat market," while the row with Saudi Arabia "will increase demand for wheat from other suppliers."

If there is one piece of good news, Bloomberg reported on Tuesday "it is business as usual" for G3 Canada Limited, a joint venture company formed by Bunge and SALIC Canada, which is a branch of the Saudi Agricultural and Livestock Investment Company. On top of a number of primary elevators operated on the prairies and port terminals in the east operated by the company, the company is building an export terminal in the Port of Vancouver, the first new terminal seen since the 1960s.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow him on Twitter @Cliff Jamieson

(AG)

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