Canadian farmers are facing steep economic losses after China imposed a 75.8 percent tariff on Canadian canola seeds. This dramatic move has caused consternation and fear. It endangers the continued use of an important crop that is key to the success of the Canadian agricultural community. For years, canola has been one of the top revenue generators for Canadian producers. Last year, it put an astonishing $43 billion back into the national economy and employed nearly 200,000 Americans.
Currently, China is the second-largest importer of Canadian canola products. It’s a vital link in the market, second only to the United States. The most recent tariff has taken a significant toll on farmers throughout the country. They have since logged more than $140 million in cumulative losses in under two weeks since its enactment. This year, we anticipate a bumper canola crop. If demand fails to match that pace, it would only add to the pressure on the hyper-competitive market.
The introduction of the tariff occurs almost exactly one year after Beijing initiated an anti-dumping investigation into Canadian canola. These tense relations between Canada and China date back to 2019 when, at the behest of the United States, Canada arrested Huawei executive Meng Wanzhou. In retaliation, China banned imports from two Canadian grain elevators.
Chris Davison, an adviser to the Canadian canola industry, emphasized the need to confront these political challenges. He pushed for solving them through diplomatic means.
“They are political issues that require a political solution” – Chris Davison
He put a point on the obvious question of payer – free or otherwise. Only after gaining this understanding can we begin to identify viable strategies for farmers to pursue.
“It’s really important that we understand what it’s going to take to resolve the issue before determining which levers we can pull” – Chris Davison
The costs of the tariffs go further than just the lost sales revenue. After traveling through western Canada, Chuck Penner, an agricultural market analyst, said farmers are feeling cornered. They wade through a treacherous maze of political and fiscal exigencies.
“What we can take from it is farmers and industry are at the mercy of politics” – Chuck Penner
He further explained that though there are other market factors involved, the impact of the tariff must be considered.
“There’s other factors going on in the market as well, but that’s just a quick and dirty look at it” – Chuck Penner
For most of the producers who plant it, canola has been a great asset to a diversified farming operation. Now, with the new tariffs stacked on top, experts are fretting about oversupply scenarios if harvest predictions come in higher than expected. Davison warned that if the harvest ends up being larger than currently projected, it could create even more havoc.
“If harvest is larger than what is estimated, then we lose the demand signal for Canadian canola. That certainly has the real potential to make things more challenging” – Chris Davison
Farmers today have very painful choices to make about their planting plans. The complexity of agricultural systems makes it unrealistic for producers to just stop growing canola without dire repercussions.
“You can’t just stop growing one of those crops wholesale because it’s a complex system” – Chuck Penner
In March, China slapped a 100 percent tariff on canola oil and meal. This decision has resulted in cumulative losses of $800 million as of that date. Ottawa has reportedly told China to make a final decision on the tariff by September. As farmers wait for some clear indication of what their futures will be, their stress only compounds.
