Grainswest - Winter 2023

Winter 2023 Grains West 20 I t is a valuable livestock feed, food ingredient, beer component and is even used to lower blood pressure, but if barley loses its market, farmers will feel the economic pressure. After Huawei CFOMeng Wanzhou was arrested in Vancouver in 2019, China banned two major Canadian grain trading companies from exporting canola seed to that country. While the three-year prohibition was lifted in May of 2022, it left the barley sector to question its own trade relationship with China. Could Canada be next? If so, what then? “Barley sales to China are a core part of Canada’s export program,” said Shannon Sereda, director of government relations, policy and markets for the Alberta Wheat Commission and Alberta Barley. China imposed an 80.5 per cent tariff on Australian barley in 2020 that effectively halted annual exports worth close to CAD $1.3 billion to the Aussies. Canada has since delivered more than 90 per cent of its barley exports to China. “Anytime you see concentration of your exports into a single market, you start to get concerned,” said Sereda. “This has led to conversations around reducing our risk by diversifying our barley sales abroad.” THE MORE THE MERREIR The broadening of Canada’s export horizons can’t come soon enough, according to Guy Saint-Jacques, Canada’s ambassador to China from 2012 to 2016. “China is a master at using coercion to send a message when they are displeased with a certain country,” said Saint-Jacques, who is based in Montreal, QC, and serves as a fellow at the China Institute of the University of Alberta in Edmonton. “According to an Australian study, China used coercive action 152 times against 27 countries from 2010 to 2020,” he added. Though Canadian canola farmers largely circumvented the Chinese tariffs from 2019 to 2022 by sending canola to Qatar, where it was crushed and FEATURE BY GEOFF GEDDES STRENGTH IN DIVERSITY Overdependence on China may leave Canadian barley vulnerable reshipped to China, that extra step was costly. “For some reason, Ottawa took a long time before launching a complaint with the World Trade Organization (WTO),” said Saint-Jacques. “I told them that [Chinese President] Xi Jinping was a very tough leader. With China, you have to hit back and hit hard when they act up like this.” In response to Chinese measures, Canada has asked the WTO to create a dispute settlement panel, something that should help crops such as barley down the road. “A decision of that panel against China would mean another black eye for their country,” said Saint- Jacques. “They pride themselves on being a champion of globalization and free trade, so they have a strong incentive to avoid such an outcome.” Black eyes aside, Canadian barley exporters must wonder if China’s incursions against their business will become business as usual in years ahead. “The key question is, what are ultimately the risks of being so heavily reliant on China as an importer of Canadian barley?” said Jonathan Driedger, senior market analyst and VP, LeftField Commodity Research in Winnipeg, MB. “Frankly, there’s a risk. And it’s not just us. You look at the U.S. and, say, soybeans, it’s good when [China is] buying because they can absorb a huge amount. And on their own with some of these crop markets, they can swing a balance sheet from being comfortable to being tight very quickly, and drive prices higher.” Conversely, when the market has come to rely on Chinese purchasing but the country buys less, or switches who it buys from, the pendulum can swing the other way. “We’ve seen that [swing] in other crop markets, and it’s not just us,” said Driedger. “Australia and other countries have been on the wrong side of that as well. It’s just the nature of being heavily reliant on one customer.” UNCERTAINTY? CERTAINLY While the uncertainty sparked by