‘Where are we going to go?’ U.S. soybeans flooding across border leaving Canadian farmers scrambling
American soybeans displaced by Chinese tariffs are flooding across the border, filling domestic crushing plants and leaving Canadian farmers scrambling to find alternate markets.
In another sign of how the U.S.-China trade war is upending global trade patterns, imports of soybeans from the United States rose to 781,879 tonnes in 2018, the highest in a decade and more than double that of the previous year.
The surge comes after a Chinese tariff on the U.S. crop left American farmers sitting on a record one billion bushels of unsold beans, three times what’s normally considered a comfortable level.
“The problem is U.S. beans are replacing Canadian beans in our own market,” said Ron Davidson, executive director of Soy Canada. “We sold to China for a while, but now we have our own bilateral issues with them and they’re not buying. So if the Americans are coming here and we’re getting shoved out of other markets, where are we going to go?”
The flow shows little sign of abetting, with data showing a further 348,043 tonnes of U.S. beans had already spilled across the border by June.
Canada isn’t the only country absorbing the excess, which slashed prices from US$10.70 a bushel last year to US$7.80 in May — the lowest level since 2008 – before rising to a current US$8.75 a bushel.
Indeed, Canadian farmers are also competing with U.S. beans abroad, particularly in the European Union, where imports of Canadian beans fell 25 per cent to 897,000 tonnes in 2018.
“We’re faced with low-priced American beans everywhere and so is everyone else,” said Davidson.
But Canada has the additional challenge of having all but lost its buyers in China. Tensions between Ottawa and Beijing have been at a high point since the arrest of Huawei executive Meng Wanzhou in Vancouver last December, on an extradition request from the U.S.
Since then, China has detained Canadians Michael Kovrig and Michael Spavor, in what was widely seen as retaliation for Meng’s arrest. It has also suspended import permits for Canadian canola and meat and dramatically curtailed purchases of Canadian soybeans.
Shipments of domestic beans to China initially surged 80 per cent in 2018 as buyers sought sources of supply beyond the U.S. But the purchases quickly bottomed out after Meng’s arrest in December.
“We’re shipping almost nothing over there and the concern going forward is price of course, but also where are we going to put all of our beans?” said Davidson, adding that Canadian crushing facilities are now processing record amounts of U.S. rather than Canadian beans. “We have to get back into China.”
The trade dispute with China was raised at the recent federal-provincial-territorial meeting of agriculture ministers in Quebec City, where provincial ministers were told that discussions with Beijing were underway, Ontario agriculture minister Ernie Hardeman said in an interview Thursday.
“Here we are another month later and we’re starting to wonder what’s holding it up,” said Hardeman, who hosted a conference call with his provincial counterparts to discuss the Chinese trade issues yesterday. “I think all the ministers are in agreement that the best possible solution would be to find an end to the disagreement.”
Pork processors cut off from the lucrative Chinese market are incurring weekly losses of up to $15 million, he said, making layoffs more likely.
“So obviously it’s getting serious,” he added. “It’s been a long time now and we need to get something done.”
We’re shipping almost nothing over there
Farmers south of the border have been cushioned from price fallout by massive aid packages from Washington, the most recent coming in July when U.S. President Donald Trump pledged a US$16 billion package for farmers. That boost came on top of the US$12 billion in compensation last year.
Ottawa has offered some support to canola farmers blocked out of the Chinese market with Agriculture Minister Marie-Claude Bibeau announcing in May that Agriculture and Agri-Food Canada would increase the maximum loan limit under the Advance Payments Program (APP) to $1 million. For canola farmers, $500,000 will be interest-free.
The federal loan program previously only allowed producers to borrow up to $400,000 per year, with the first $100,000 interest-free.
“We are working to resume trade of key agricultural exports with China as soon as possible and have also been hard at work to create new opportunities by expanding global markets for Canadian businesses,” Bibeau said in an emailed statement.