Going against the grain: How the Chinese canola ban is affecting Manitoba

When the most populous nation on Earth suddenly decides it no longer covets Canadian canola, there's obviously more going on than the alleged trans-oceanic trade in unwanted organisms.

China is refusing to import Canadian canola, claiming unspecified creatures are crawling among our oilseeds.

First, it revoked Richardson International's canola export permit, prompting a wave of consternation about potential retaliation for the December arrest of Huawei chief financial officer Meng Wanzhou.

Then China claimed Viterra's canola shipments are also contaminated, further fuelling fears one of Canada's top agricultural exports could become a casualty of the volatile relationship between the Asian superpower and the United States, which had requested Meng's arrest.

The stakes in this dispute are high in Manitoba, which covers more acres with canola than any other crop and counts on canola production and processing worth about $4.2 billion every year, according to the Canola Council of Canada.

But for now, the province appears to be viewing the impasse more like a game of brinksmanship than as a straight-up trade dispute.

Can't absorb loss of Chinese market: canola council

This is partly because China has raised concerns about Canadian canola before, demanding higher standards to prevent the spread of the fungal disease blackleg.

It's also because China has been buying more Canadian canola every year to fuel its voracious food-production industries.

"We do know they need our canola and they will have to come back with cap in hand," Manitoba Agriculture Minister Ralph Eichler said in an interview on Tuesday.

He reiterated his desire to take part in a trade mission to China, something Prime Minister Justin Trudeau confirmed he's considering in an effort to end the Sino-Canadian canola tiff.

"Certainly we realize that we don't have a strong relationship with China. Obviously if we did, they wouldn't be doing this to us," Eichler said.

While Canada is no stranger to trade disputes, the Chinese ban on canola imports bears little resemblance to the mundane likes of of the softwood lumber battles with the U.S. or the more recent Trump-era aluminum tariffs.

For starters, there's the belief China is attempting to teach Canada a lesson for doing the diplomatic bidding of the United States.

"Things are so globally interconnected that a major conflict between two big players is going to have downstream effects," said Paul Larson, a professor of supply-chain management at the Asper School of Business at the University of Manitoba.

"It seemed like for years there would be disputes between nations, but they wouldn't really go so deeply into trying to harm each other with things like trade trade embargoes [or] trade sanctions."

It's very difficult to replace over four million tonnes of canola that would otherwise be going to China.- Jim Everson, Canola Council of Canada

The dispute also strikes observers as illogical, given that Canadian canola producers and Chinese buyers need each other.

Canada is the world's largest canola producer and by far the top exporter. China, meanwhile, accounts for more Canadian canola purchases than the next three markets combined: the United States, Mexico and Japan.

Canada simply can't absorb the loss of Chinese market, said Jim Everson, president of the Canola Council of Canada.

"Our domestic processors are at or near capacity in the work that they're doing already," Everson said at his office in Winnipeg.

"Certainly the industry will do everything they can to utilize canola through the processing side but, you know, it's very difficult to replace over four million tonnes of canola that would otherwise be going to China."

Highlights need for diversity: ag minister

Manitoba nonetheless has plans to encourage more canola processing, Agriculture Minister Eichler said. The canola dispute with China also highlights the need to diversify Manitoba's crop cover, he said.

That won't happen overnight. Manitoba farmers who were planning to grow canola this summer are not likely to change their plans six weeks away from the mid-May seeding, said Starbuck-area farmer Charles Fossay, who serves as president of Manitoba Canola Growers.

While canola prices have dropped about $20 a tonne, that isn't enough to convince agricultural producers to consider other crops, Fossay said.

Eichler said it's too soon to consider what effect this dispute could have on Manitoba's bottom line. It's more important to simply end it, he insisted.

"This is more of a political ploy on behalf of the Chinese government," Eichler said.

A longer-term concern is the global reputation of a commodity that was named after Canada. The sooner the Chinese claims about canola quality are put to bed, the better, Everson said.

"We need to address that really quickly anyway, because we don't want a black mark in other global markets around the quality of Canadian canola."