IN THIS EDITION: China’s bans on Canadian agriculture take their toll, Chinese patent applications skyrocket, and the Canadian rare earth elements industry in China’s shadow.
“China was such a significant player for us last year and that’s all gone. Going forward it’s going to be very challenging as to what we do.” – Ernie Sirski, board chair of Soy Canada, on the predicament of Canadian soy farmers
Agriculture
Canadian agriculture is under increasing pressure as China’s bans on various Canadian agriculture commodities take their toll.
CANOLA
• China’s ban on canola – in place since March – has resulted in tonnes of canola still sitting in bins on farms. Agriculture Canada is forecasting 4.5 million tonnes of carryout at the end of the year, and a senior executive at Viterra is predicting it will be 8 million tonnes.
• A lot of Canadian canola is sold in the unprocessed seed form, and a lot of that is usually sold to China. It would appear that this is a golden opportunity for those looking to expand canola processing (crushing) facilities in Canada, but that isn’t happening.
• Investors appear to be wary about what happens when (if?) China opens its doors to Canadian canola again – it’s expected that Canada will start to export canola to China en masse and unprocessed again. According to Brian Innes of the Canola Council of Canada, “They want to have a strong sense of what the economics will be for the next few decades, not for the next few weeks or months.”
SOYBEANS
• Canadian soy farmers have been hit with a double whammy: being cut off from China’s market since about the beginning of the year – by far its largest market – and depressed soybean prices (Canadian soy prices are based on American soy prices, which have plummeted after the US. was cut out of China’s market).
• There are ways for this situation to improve, but this will either require some kind of resolution to the trade disputes with China, and/or skyrocketing Chinese demand.
There was some good news for Canadian pork producers (although bad news for pigs in general). China’s output of pork fell 17% year-over-year for January-September period. The size of the swine herd in China declined 28.5%.
• Canada has not been able to export pork to China since the end of June, but China’s experiences with African Swine Fever have skyrocketed its demand for imported pork. So even though Canada still can’t export to China, it can export to other countries that are having shortages because their usual suppliers are selling more to China. (Check out these earlier China Briefs where I dove into the pork issue more deeply.)
Finally, there have been accusations that peas and lentils grown in the United States have been exported to Canada and then exported to China and India labelled as a Canadian product. If these accusations prove to be true, a possible Chinese response would be to close their market to Canadian peas and lentils as well.
Rare Earths
• The China Brief recently looked at the possibility of Canada growing its rare earth elements industry, an industry that China dominates. That idea was kiboshed in a Financial Post article, which argued that investors aren’t interested in the Canadian rare earth industry because China dominates the supply chain, and there are fears that China could manipulate the market to make it unprofitable for investors in other countries.
Patents
• According to a new report from the World Intellectual Property Organization (WIPO), last year China filed 1.54 million patent applications, far more than any other country and a 12% increase from the year before. Canada is 9th on the list of patent applications for 2019, at roughly 36 thousand.
Diversification
Our own Carlo Dade and Sharon Sun (along with Dan Ciuriak) published a piece on the partial trade agreement signed between Japan and the United States, saying that “While this is not good news for Canada, neither is it disastrous.” Japan is an important country to export more to if Canada wants to diversify more in Asia (and diversify away to a certain extent from China.) They argue that if Canada moves fast enough, it can get into market opportunities in Japan before the U.S., but the clock is ticking.
Other bits
• China’s new ambassador to Canada, Cong Peiwu, recently spoke about Isabel Crook as “an example of good bilateral ties between Canada and China.” Ms. Crook is a Canadian who lives in China, is a devoted communist, and was jailed in China during the cultural revolution.
• David Mulroney, former Canadian ambassador to China, said that “Not only is the example of Isabel Crook unlikely to inspire much more than compassion for her suffering on behalf of such an unworthy cause, but, as we near the first anniversary of the detentions of Michael Kovrig and Michael Spavor, we are also reminded that the Communist Party of China has a long history of capriciously locking up foreigners.”
– Sarah Pittman, policy analyst
The China Brief is a compilation of stories and links related to China and its relationship with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.