Canadian farmers caught between two trade disputes as China hits canola products with tariffs

Just when canola farmer Roger Chevraux thought things were bad enough, they got worse.

 

Since U.S. President Donald Trump’s inauguration in January, canola farmers and processors have faced the threat of 25-per-cent tariffs on $7.7-billion of exports to the United States, their largest market.

 

Now, Canada’s second-largest export market, China, says it is introducing 100-per-cent tariffs on more than $900-million of canola oil and meal on March 20.

 

This double threat against one of Canada’s largest crops is starting to trickle down through the Prairie agricultural supply chain. Some grain handlers – potentially shut off from two of their largest markets – are closing bids on canola.

 

“I’ve never seen this before,” said Mr. Chevraux, a fourth-generation farmer who is also chairman at the Canadian Canola Growers Association.

“It’s never good when we lose a market, especially one that size.”

The industry is caught in the middle of political tensions far outside its control. It is hoping Ottawa will negotiate a better deal with Beijing, and the potential double trade war won’t cause lasting effects to a $43.7-billion Canadian product that provides more than 200,000 jobs.

 

Beijing announced the tariffs Saturday as part of $3.7-billion worth of levies against Canadian agricultural and food products, including 25-per-cent duties on pork and seafood products, in a retaliatory move against Ottawa’s August decision to impose 100-per-cent tariffs on Chinese electric vehicles. That levy was aimed at keeping North America’s industry competitive.

 

The continued uncertainty is also deterring investment in what until recently was a fast-paced multibillion-dollar push toward value-added processing in canola seed crushing.

 

But Mr. Chevraux, like the 40,000 canola farmers across Canada, has few options. Seeding across Western Canada will begin by the start of May at the latest. Switching crops now is challenging.

 

“This is coming at a moment when we just can’t take any more body blows,” said Chris Vervaet, executive director of the Canadian Oilseed Processors Association.

 

China is the second largest market for Canadian canola seed, oil and meal, after the United States. The tariffs do not apply to seed. However, China imports $20.6-million of Canadian canola oil and is an irreplaceable market for $918-million of canola meal.

 

Canola meal – a byproduct from crushing seed – is a source of high-protein feed for livestock and aquaculture. The largest market is California’s dairy sector. The second largest is Chinese livestock and aquaculture, where it is fed to pork and farmed fish.

 

Replacing these markets is near impossible, Mr. Vervaet said. Few jurisdictions outside the United States and China have the scale of livestock or aquaculture production to absorb the quantities produced by crushing plants in the Canadian Prairies.

 

And this crushing plant capacity is expanding, fast.

 

Since 2021, five major investments were aimed at increasing crushing capacity by 60 per cent. These investments came from grain heavyweights Cargill, Louis Dreyfus Company, Richardson International, Viterra Canada, alongside a joint venture from Federated Co-operatives Limited and AGT Foods and Ingredients.

 

But these projects are beset by other challenges. Legislation in the U.S. and Canada that incentivizes gasoline producers to insert clean fuels into their mix drove the push to canola oil refineries. However, shaky trade with the U.S. is upending export demand, while the looming federal election has thrown the domestic market into uncertainty. Conservative Leader Pierre Poilievre has dubbed renewable-fuel legislation a “second carbon tax.”

 

These factors drove Federated Co-operatives Limited to announce an indefinite pause on their multibillion-dollar canola crush and refinery plant in Regina on Jan. 17.

 

Mr. Chevraux could consider planting another crop until the trade war with China abates, however, planning for canola is already under way. Switching would require him to buy different fertilizers, source different seed and reconsider his crop rotation.

Instead, he is hoping Ottawa will be able to successfully negotiate with China.

 

However, the Asian nation has had long-standing grievances with Canadian canola imports.

 

In September, Beijing started a one-year anti-dumping investigation into Canadian canola imports. The move came weeks before Canada launched 100-per-cent tariffs on Chinese-made EVs.

 

While the current tariffs do not include seed imports, there is still room for escalation, Rosa Wang, an analyst with agricultural consultancy JCI, told The Globe and Mail on Saturday. These exports – worth around $4-billion – are the lion’s share of Canada’s market stake in China.

 

Canola farmers and processors are therefore in the middle of a complex geopolitical fight, far from their own making, that could very well escalate, said Chris Davison, president and chief executive officer of Canola Council of Canada.

 

Matthew Glover, a spokesman for Saskatchewan Premier Scott Moe, said in a statement that his province is being disproportionately affected by the Chinese tariffs.

 

“We have reached out to the Federal Government to request they engage with China for a resolution as soon as possible.”

 

 

 

 

 

This article was first reported by The Globe and Mail