Canadian farmers are about to harvest 6 million tonnes of soybeans — the worry is who will buy them?
Canadian farmers will harvest more than six million tonnes of soybeans starting this month, but with their top market gone and another crowded with a competing surplus of U.S. beans, they aren’t sure where they’ll be sold.
“It’s something that comes up in my thought process every day,” said Ernie Sirski, a Manitoba soybean farmer and board chair of Soy Canada. “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.”
It’s got to move and if it can’t move, what are we going to do? Dump it in the St. Lawrence?
Ron Davidson, Soy Canada’s executive director
Shipments of Canadian soybeans to China – the world’s largest buyer of the oilseed – have remained negligible since December, when police arrested Huawei executive Meng Wanzhou in Vancouver on an extradition request from the United States. The plunge came after sales had surged 80 per cent in 2018 – when a Chinese tariff on U.S. beans left the Asian superpower to seek alternate markets such as Canada.
Shut out of China, American farmers were left holding a record one billion bushels of unsold beans — roughly three times the normal amount. That “lower price, aggressively marketed” surplus soon made its way into the European Union – the second largest market globally – where it threatened Canada’s foothold in 2018, said Ron Davidson, Soy Canada’s executive director. And though sales to the EU have picked up somewhat this year, they remain below average levels. Meantime, excess U.S. beans are also pushing across the border into the Canadian market.
“Not having access to China is a big issue, being crowded out of the EU market is a big issue and having big imports coming into Canada is a big issue,” Davidson said. “And on top of all that, the weather. The combines are in the field. It’s got to move and if it can’t move, what are we going to do? Dump it in the St. Lawrence? I don’t know.”
China is by far the largest consumer of soybeans, purchasing roughly 85 million tonnes of the 148 million tonnes of soybeans traded annually. The EU ranks as the second-largest market, purchasing 15 million tonnes each year.
Finding alternate markets to fill the gaps left behind isn’t easy, but that doesn’t mean there aren’t buyers out there, said Carsten Bredin, vice-president of grain merchandising for Richardson International, Canada’s largest grain company.
“You can sell those beans; it’s just that farmers don’t want to sell them at the current price,” Bredin said. “Our market is depressed no question. If you don’t have China, which controls almost 60 per cent of the market, you’re at a disadvantage. Canada is at the bottom of the price chain because of politics.”
I can deal with weather, I can deal with price uncertainty … but I can’t compete with the U.S. Treasury
Ernie Sirski, a Manitoba soybean farmer and board chair of Soy Canada
Soybean prices fell from US$10.70 a bushel last year to US$7.80 in May — the lowest level since 2008 — before rebounding to a current US$9.33 a bushel on positive trade news. Indeed, China will buy US$20 billion of U.S. agricultural products in the first year if a Phase 1 trade deal is signed with the U.S., Bloomberg reported. Beijing also issued waivers for 10 million tonnes of soybean purchases this week.
But that doesn’t mean China will open the doors to Canadian farmers.
“I think it’ll be four or five years before China comes back to us,” said Sirski of Soy Canada. “I don’t know what happens in the meantime.”
A US$28 billion aid package from Washington has eased the pain of the trade wars for American farmers. For soybean farmers it has lifted the per-bushel price to roughly US$10.13, allowing them to sell at lower prices and frustrating producers north of the border, according to Soy Canada.
“I can deal with weather, I can deal with price uncertainty, I can do a lot to mitigate losses, but I can’t compete with the U.S. Treasury, said Sirski, who farms 5,500 acres at his farm two hours north of Brandon, Man. Like other Canadian farmers, Sirski’s soybeans came in late this year due to an unexpected snowfall and subsequent thaw that left sodden fields.
“We didn’t turn a wheel for 10 days,” he said. “But soybeans can take a lot of abuse.”