August 6, 2019
Canola seed trade with China continues to be blocked. The licenses of two companies, Richardson and Viterra, to export canola seed to China remain suspended. Chinese importers remain unwilling to purchase Canadian canola seed from exporters at this time, although a small amount of canola seed sales to China have recently occurred. Oil exports continue and are being monitored closely. Canola meal shipments remain unaffected. As has been reported, Chinese buyers are reluctant to purchase a variety of Canadian agricultural products, including meat, grains and oilseed products.
The Canola Working Group remains focused on regaining access to the Chinese market and continues to meet regularly. It is actively considering all options to support predictable, rules-based trade – particularly as China has not responded to requests for a Canadian delegation to visit to understand the scientific basis behind China’s actions. The Group is working on diversifying canola exports and is reviewing a range of activities that includes enhancing market access and promotion activities in alternative Asian markets where there’s opportunities for canola seed, oil and meal. Diversifying markets in Canada by increasing the amount of canola used in biofuel is also being discussed. Supporting producers is top of mind for the Group and efforts are underway to monitor market conditions closely, so that if action is needed in the future it is timely and effective.
What is the current situation affecting canola seed exports to China?
Chinese importers are currently unwilling to purchase Canadian canola seed from any exporters at this time, although a small amount of canola seed sales have occurred. China has officially taken regulatory action to suspend the licenses for Viterra and Richardson for canola seed. Canadian exporters must be licensed in order to export canola seed to China.
China has been a major market for Canadian canola, accounting for approximately 40% of all canola seed, oil and meal exports. Canola seed exports to China were worth $2.7 billion in 2018. Demand has been very strong until recent disruptions.
Does this affect canola oil and meal exports?
Canola oil and meal are not subject to the same challenges as seed. Oil exports continue to occur and are being monitored closely. Canola meal shipments remain unaffected.
What are the license suspensions based on?
China has indicated they have a quality concern with Canadian canola seed related to specified quarantine pests that include weed seeds and plant diseases. These are identified in the public notices of non-compliance issued to Richardson and Viterra by China’s customs agency. The Canadian Food Inspection disagrees with the assessment of China’s customs agency.
Technical discussions about these pests of concern have not indicated that an immediate resolution is possible. We are confident in the quality of Canadian canola. Our canola consistently meets the requirements of countries around the world.
Has a third company been suspended?
A third company has been issued a notice of non-compliance but not a suspension of their export license. Non-compliances are issued directly from China’s customs agency to the company involved and the Canadian Food Inspection Agency. This information is confidential, and shared only between the company and the Government of Canada.
What does this mean for existing contracts and deliveries?
Grain handlers have confirmed they are honouring all contracts for seed delivery, though this may involve some delays in delivery to the grain elevator. For contracts where a grower does not have the grade contracted for delivery, the grower will need to work directly with their grain buyer.
What does this mean for new contracts and deliveries?
China represents approximately 40% of canola exports and no sales of seed to China are occurring. This impacts the demand for and value of canola. Canola seed exporters are looking to supply customers in other countries such as Japan, Mexico, Europe, Pakistan, the UAE and Bangladesh, who value high quality Canadian canola. Growers are encouraged to contact their local grain buyer to discuss marketing options.
For those managing longer-term storage of canola, the Canola Council’s Canola Encyclopedia offers a comprehensive resource of best management practices for safe, on-farm canola storage.
Should growers cut back on growing canola?
Growers, as always, need to make their own choices, and consider many factors when making seeding decisions. We believe the fundamentals of trade with China are strong – we have an industry strategy to ensure a sustainable and growing supply of high quality canola in Canada, and growing demand in China for high quality oil and protein. We have a challenging situation in China at this time but believe the basis for trade in canola between the two countries remains solid.
What relief is being provided to canola growers who are feeling financial pressure?
On June 3, the Government of Canada announced it has implemented the new regulations necessary to increase loan limits under the Advance Payments Program (APP) as announced on May 1. Growers can contact their APP provider for more details, and can read the news releases from the Government of Canada and Canadian Canola Growers Association.
How is the Canola Council responding?
The Canola Council, which includes growers, continues to work closely with the Government of Canada to find science-based solutions and resume stable trade as quickly as possible. The Government of Canada has acted quickly, and is engaged at the most senior levels to resolve the issue. This has included numerous interactions between the Canadian Food Inspection Agency and their Chinese counterpart to resolve quality concerns that have been raised, including a request for a high-level mission to intensify science-based discussions. Technical discussions with China are required to resolve technical concerns.
The CCC is also co-chairing the Government of Canada working group on canola. We will continue our efforts to focus attention in Ottawa on resolving this issue as quickly as possible.
Who is involved in the Government of Canada working group on canola? What is its role?
The working group is co-chaired by the deputy minister of Agriculture and Agri-Food and the president of the Canola Council of Canada, and includes the president of the Canadian Food Inspection Agency, the president of the Canadian Canola Growers Association, deputy ministers from the provinces of Alberta, Saskatchewan and Manitoba as well as other senior government and industry officials.
The working group is collaborating on a strategy to regain access to the Chinese market as quickly as possible, using all options to support predictable, rules-based trade. The Group is also coordinating efforts to diversify canola markets and support producers (see further information below).
What are the next steps that the Canola Council is recommending?
As we focus attention in Ottawa on resolving this issue as soon as possible, the Canola Council feels the following steps are necessary:
- Complete a technical mission to China as soon as possible. As part of normal procedure, Canada has requested that a high-level delegation to Beijing be received by China to intensify science-based discussions. We urge China to accommodate this request as soon as possible.
- If China does not accommodate this request, we urge the Government of Canada to work with the industry and take all possible measures to resolve this situation and restore market access. This includes investigating how China is meeting its obligations under the World Trade Organization.
- We recommend the appointment of an ambassador to China at the earliest opportunity. Canada has an outstanding foreign service, including at our embassy in Beijing. However, an ambassador has a unique role as Canada’s most senior representative and it is appropriate that Canada appoint an ambassador to this significant export market.
Through the Government of Canada working group, we are looking at a wide range of options to restore access to the Chinese market, engage alternative markets and support canola producers dealing with significant market uncertainty. This includes advancing the following:
1) Diversify markets
- Domestically – Increasing the renewable content in diesel to 5% would equal 1.3 million tonnes of canola utilization and reduce greenhouse gases by 3.5 MT per year.
- Internationally – Efforts to expand exports of seed, oil and meal to new and existing customers are being made, such as improved financing options for new customers. There’s also an opportunity to bolster capacity in Asia to prevent and resolve barriers to trade.
2) Support producers through this unprecedented uncertainty
- On May 1, the Government of Canada announced its intention to increase loan limits under the Advance Payments Program (APP). The new regulations were implemented on June 3.
- Work is ongoing to monitor market conditions closely, so that if action is needed in the future it is timely and effective. This includes asking for flexibility to adjust the current suite of business risk management programs, should they be needed.
- The Canadian Canola Growers Association is leading producer support efforts, more information can be found on their blog.
Has the Government of Canada brought this issue to the WTO?
On May 7, Canada raised concerns about China’s treatment of Canadian canola at the World Trade Organization, pressing China to show evidence of their quality concerns. The Canadian ambassador told WTO members at the Council meeting, including China, that, “Canada has repeatedly asked China for the scientific evidence that supports its findings and the measures taken – but China has not been forthcoming in providing this information.” During his remarks the ambassador highlighted how an “open and predictable rules-based international trade is the only way global commerce can succeed.” After noting that Canada has tested the shipments in question twice and found they comply with Chinese requirements, Canada asked China to “engage in solution finding” as Canada has done using every available channel. Read the Canadian ambassador’s full statement.
For more information, the Canola Council has posted the following updates/statements on this issue:
Government of Canada updates: