The Canadian Grain Commission's December Export of Canadian grain and wheat flour report shows an interesting trend when it comes to grain exports since Aug. 1 or so far this crop year. Cumulative exports for 2019-20 show Canada's licensed wheat exports to China are up 138.4% from the same period in 2017/18 to 991,700 metric tons, dry pea exports to China are up 19.2%, to 595,000 mt, canola exports to this market are 28.9% higher at 2.1378 million metric tons, and exports of soybeans are up 143.7% to 3.0456 mmt.
At the same time, exports of canola to almost all other markets have fallen. Of the 10 destinations for canola reported in this report, eight have realized a year-over-year drop in volumes shipped. On a volume basis, the largest year-over-year change over the first five months of the canola marketing year were seen in the United Arab Emirates where volumes dropped 210,500 mt and to Mexico where the cumulative volume has dropped 224,100 mt. Only one other country besides China has seen a year-over-year volume increase: Columbia, where volumes increased from zero in 2017-18 to 33,200 mt in 2018-19.
The same can be said for soybeans, where year-over-year volumes have fallen in 15 out of 18 markets reported, while year-over-year increases in volumes shipped were realized in three markets, with China showing the lion's share of the increase. Of this list of 18 export markets, seven destinations have seen exports fall to zero so far in 2018-19.
The U.S.-China trade war has acted as a disruptor for global markets. From the start, Soy Canada statements expressed guarded optimism over the potential for increased volumes into China, while adding concern about the balance of the markets Canada sells into, due to increased competition from U.S. soybeans looking for outlets. Here at home, concerns were also expressed about increased volumes of imported U.S. soybeans pressuring Canadian markets.
As an example, it is reported that market forces has allowed a larger volume of U.S. soybeans exported to Europe after the European Union agreed to buy more soybeans from the U.S., given an agreement made last summer to avoid additional tariffs on other imports. A further announcement was made by the EU on Jan. 29 to allow U.S. soybeans to be used in bio-diesel production, making it even easier for U.S. product to flow into the EU. In the September-through-December period of 2017-18, Canada exported 1.152 mmt into Western Europe, while this volume has shrank to 83,300 mt in 2018-19.
The attached graphic highlights the year-over-year percent change in volumes move to the largest of Canada's canola and soybean export markets, while omitting markets where volumes appear under 100,000 mt. Of the larger markets Canada exports to, year-over-year increases in volume are noted only for shipments to China.
The risk to Canada's industry is what could happen when things go awry between Canada and China, which is exactly what is happening. A National Post piece reporting that Canada is facing "its worst-ever spat with the People's Republic of China." A weekend piece carried by this paper focused on what is being said and reported in China, with the notion of "economic ruination" as one of the ideas that is being promoted. With one editorial run in China pointing to Canada's $8 billion in agricultural exports in 2017, while highlighting Canada's lack of bargaining power.
Another risk faced by Canadian industry is that a further thawing of relations between the U.S. and China takes place. The U.S. industry has already sold a volume of soybeans to China in recent weeks, although the volumes are yet to be disclosed. Trade negotiators from the two countries will meet this week and a further easing of trade tensions could occur.
Yet another concern is that the issues between the two countries remains prolonged. Some media analysts are already pointing to the extradition process to send the Huawei executive held in Vancouver to the U.S. could take months, maybe years. This could only leave trade and prices in a precarious position, along with the situation for the Canadians imprisoned in China.
Export movement has slowed in Canada since the start of 2019. Grain Commission data for weeks 23-25 shows 413,800 mt of canola exported through licensed channels, down 38% from the three-year average for this period, while a further 36,500 mt of soybeans have been shipped, down 82% from the three-year average for this period.
For those holding old-crop unpriced supplies, there may be a number of reasons to be a seller.
Cliff Jamieson can be reached at firstname.lastname@example.org
Follow him on Twitter @Cliff Jamieson
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