DTN routinely looks back at the top stories of the previous year in the days leading up to each new year. Today we continue with the final five of what we consider the top stories or events in Canadian agriculture in 2018, with the first five listed in Friday's Canada Markets Blog, in no certain order of significance.
6. RAILWAY FAILURES STRAND GRAIN ON PRAIRIES
Just a few short years after the grain backlog caused by railway failures in the 2013-14 crop year, the winter months of 2018 led to yet another wreck in the movement of grain. By March 1, the situation was called a crisis, and billions of dollars of grain was backed up on the Prairies. Producers faced a cash flow crunch, while Canada once again was losing credulity in global markets. "Our reputation -- Saskatchewan's reputation and Canada's reputation -- as a reliable supplier of commodities, as a trustworthy business partner is being damaged," Premier Scott Moe of Saskatchewan told the National Post.
A look at Ag Transport Coalition weekly data shows in week 30 of the 2017-18 crop year, or the week ended Feb. 25, Canada's two major railways spotted just 32% of the hopper cars wanted for loading, with CN Rail spotting 17% of the cars wanted and CP spotting 50% of the cars wanted. This was the poorest performance recorded for either railroad during a shipping week over the crop year, while also the poorest combined performance. By this time, the outstanding orders reached a weekly high for the crop year of 5,383 cars, while the number of cars rationed or cancelled totaled 17,210, a volume that would continue to grow to 22,933 cars by the last week of the crop year. These failures are highlighted on the attached graphic.
As a result, Bill C-49, or the Transportation Modernization Act, received Royal Assent in Parliament on May 23, which addressed railway failures along with a wide array of transportation issues. Initiatives from this bill are far from implemented, with most aspects of the bill hoped to be in place for Aug. 1 or the start of the 2019-20 crop year. Railway performance has been good overall in the 2018/19 crop year, with both railways spotting a combined 88% of the cars wanted for loading in the most recent week 20 data, while outstanding orders total 1,077 cars and railway cancellations total 2,118 cars.
7. FEDERAL GOVERNMENT FORGES FORWARD ON CARBON TAXES
Debate and disapproval over the federal government's carbon pricing plan raged on over much of 2018, while the government has announced a plan to tax carbon within the provinces that have yet to introduce their own plans, including Ontario, New Brunswick, Manitoba and Saskatchewan. This is set to start at a rate of $20/metric ton, while rising $10/year until 2022. This announcement was made in October, when Prime Minister Justin Trudeau stated, "Starting next year, it won't be free to pollute anywhere in Canada."
Canadian agriculture is largely united in its opposition to the move, which will see federal fuel taxes hiked on April 1 at the gas pumps, although farm diesel is exempt. Opposition is centered around the cost of commercial movement of grain or inputs, increased natural gas or propane costs in the production of fertilizer, heating homes and barns and drying grain, the inability to pass increased cost on and the lack of competitiveness with global players that do not face these costs. Also noted is the lack of recognition of carbon sequestration on farmland, as well as the many benefits that biotechnology and farming practices have introduced that led to reduced carbon emissions.
The year ahead is shaping up to be an interesting one as the federal government seeks to achieve harmony in this issue ahead of this fall's federal election. The Government of Saskatchewan is poised for a constitutional challenge in the Saskatchewan Court of Appeal, while the list of interveners in this proceeding includes the Province of Ontario, Alberta's opposition UCP party, the Canadian Taxpayer's Association and the Agricultural Producers Association of Saskatchewan, to name a few. The Province of Ontario will also issue its own appeal in the court system in April. Despite the federal government's opposition, the Saskatchewan court accepted anyone who applied to intervene, with the province's Justice Minister Don Morgan telling the Saskatoon StarPhoenix the variety of speakers will make the process "a little more interesting, maybe a little bit more of a challenge for the court to be able to hear all the arguments."
8. TRADE BARRIERS CONTINUE TO SLOW GRAIN EXPORTS
Two issues that stand out are barriers to durum exports to Italy as well as pulse exports to India. As of November, Canadian Grain Commission data, exports of durum to Italy were reported at 115,700 metric tons this crop year or since Aug. 1, or 11.3% of total exports, down 59% from the 283,300 mt reported in the same period in 2017/18. In 2017/18, the CGC reports 9.8% of Canadian exports destined for Italy, or 386,900 mt, while the past five years (2013-14 through 2017-18) have seen an average of 946,600 mt or 21.2% of total durum exports shipped to this country. In 2014/15, 1.4 million metric tons or 31% of total exports were shipped to Italy.
While Italy has targeted a Made in Italy country-of-origin label, large buyers have also keyed on tests showing traces of glyphosate as rationale to defend their actions. Just days before Christmas, the Saskatchewan Wheat Commission reported a successful trade mission into a number of countries, while expressing optimism that sales to some Italian buyers could resume.
India's continued bid to reach self-sufficiency and related market intervention moves by that country continued to haunt Canada's pulse trade in 2018. It is believed that the Indian government is posturing for the rural voters ahead of 2019 elections. Meanwhile market watchers are keying on rabi crop planting which is now 6.3% behind the same week in 2017 while the latest data shows Oct. 1-through-Dec. 19 moisture accumulation across the country is 42% below normal.
In the first three months of 2018-19, Canada has exported 39,030 mt of peas to India, or 4.5% of total exports, while over the past three years an average of 568,065 mt was shipped to India in this period, averaging 45% of shipments. Looking at lentil exports, August-through-October lentil exports to India total 94,220 mt, or 21% of all exports, while over the past three years, an average of 317,135 mt was shipped in the same period, roughly 42% of all exports.
9. CHINA SLAPS ON SOYBEAN TARIFFS
A 2018 timeline of the U.S.-China trade war started as early as January 2018 with U.S. tariffs announced on washing machines and solar cells, while the U.S. tariffs on imported steel and aluminum to all countries began on March 9. Since then, a number of trade barriers have been announced by either country, with China announcing a 25% tariff on U.S. soybeans on April 4.
Canadian commodity groups responded cautiously to Canada's potential through this trade war. On April 4, the day China's announcements were announced, soybeans closed at $10.15 1/4/bushel on the continuous chart, while closing at $8.95/bu. (continuous active chart) by the end of the year, the most obvious effect of these tariffs. Soy Canada expressed concerns of the increased chances of U.S. soybean imports into Canada pressuring domestic markets, while also expressing concern of a potential increase in competition faced in global markets outside China. On July 24, the U.S. government announced a $12 billion aid package to help producers deal with declining prices faced across a number of commodity markets, placing Canadian producers at a further disadvantage relative to their U.S. counterparts.
Current media reports indicate the U.S. may be set to meet with China in January 2019, while the U.S. is currently pushing China for further details surrounding their recent proposals and the U.S. is threatening more tariffs on imports from China by March 1 should talks fail.
China's resilience in this matter will be closely tied to that country's efforts to reduce demand for soymeal while also tied to the prospects for South American production. In recent days, China announced a move to eliminate duties charged on competing vegetable meals, including canola meal, which bears watching.
10. CANADA STRUGGLES WITH FOREIGN RELATIONS
Canada found itself in turmoil with major trading nations in 2018. The most obvious and already covered was the roller-coaster ride involved with arriving at a NAFTA replacement with the United States, but others also popped up over the year.
Trudeau's failed trip to India in February is perhaps one that sticks out. While there was a great deal of criticism over the trip, including the cost and questionable ethnic wardrobes worn, a wedge was created between the two countries when it was discovered the Canadian government had invited to receptions in India a British Columbia man who had previously been convicted of attempting to murder an Indian politician visiting Canada more than 30 years ago. The Canadian government then tried to deflect blame on an inside job by factions of India's government.
On Aug. 2, Canada's Foreign Affairs Minister Chrystia Freeland released a tweet calling for the release of prisoners held in Saudi Arabia, while Foreign Affairs Canada released a similar tweet on Aug. 3. Saudi Arabia immediately responded by criticizing Canada's "negative and surprising attitude" while indicating, "the ball is in Canada's court." The country then embarked on a number of actions, pushing out Canada's ambassador, suspending all business and trade with Canada and initially calling home all doctors in training on Saudi scholarships in Canada. Tom Steve, general manager for Alberta Barley and the Alberta Wheat Commission stated, "... Canadian grain farmers are export dependent and we are concerned at the loss of any export market."
Lastly, and more recently, Canada's arrest of a Chinese Huwaei CFO in Vancouver for eventual extradition and charges to be faced in the U.S. has resulted in a diplomatic row between the two countries, with China responding by imprisoning two Canadians in that country. While this has yet to spill over into trade-related issues, this is just another reminder of the challenges Canada's leaders face in maintaining trade relations with some of the world's largest buyers while enforcing Canadian laws as well as the laws of our closest allies.
Cliff Jamieson can be reached at email@example.com
Follow him on Twitter @CliffJamieson
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