Grainswest - Winter 2023

Winter 2023 grainswest.com 21 “The key question is, what are ultimately the risks of being so heavily reliant on China as an importer of Canadian barley?” — Jonathan Driedger Chinese barley tariffs has disturbed the international market, that market is no stranger to disruptions, especially where China is concerned. “Global commodity markets are highly unpredictable and uncertain to start with,” said Driedger. “On top of that, China, even in quote, unquote, ‘normal times,’ is often a difficult market to anticipate what exactly they will do. They are increasingly opaque. Their buying habits are not just driven by markets—import price, export price, freight and so forth. There are often maybe other political motives behind where they buy from or don’t buy from. All of those things add a greater layer of uncertainty.” Of course, what goes up must come down. If the markets shifted with the China–Australia situation, will they shift again when cooler heads prevail? If, for example, China at some point imports significantly less Canadian barley than it had previously, Canada will simply export less barley, said Driedger. Though such a drop in Canadian barley exports to China could push prices down here at home, it might not equal doom and gloom. “In Canada, we do have a fairly tight barley market this season anyway,” said Driedger. “So, it might not be as bearish in the shorter term, as in years when we already have an abundance and you’re sort of needing China to clear some supply. Maybe barley, for example, just displaces some imported U.S. corn. Maybe the risk would be a little bit longer term. If we ended up planting a lot of barley and having big yields next year, and now supplies start to rebuild.” To safeguard Canada’s barley export program, some experts believe there is a clear need for Canada to diversify beyond China. “Canada has a long tradition of selling malting barley to China. We have very good relationships with our buyers there and Canadian barley is recognized as a premium product. But having China as our biggest market by far could put us in jeopardy if there is ever a trade dispute,” said Peter Watts, managing director at the Canadian Malting Barley Technical Centre in Winnipeg, MB. “As a result, we are exploring existing markets where we could increase our exports and looking at the potential for new markets.” For example, Japan is now an important market for Canadian feed and malting barley as well as processed malt, but there is potential to build on this. “Mexico is another key client,” said Watts. “They are Canada’s second largest market for processed malt, and they also need half a million tonnes of malting barley every year that we are not currently supplying them. That is a great marketing opportunity, as are countries in southeast Asia such as Vietnam and Thailand and South American locations like Colombia, Peru and Brazil.” POWER IN THE PROACTIVE While expanding our reach is a priority, so too is preventing future trade obstacles with China and other barley buyers. “The European Union has adopted a new anti-coercion law allowing them to impose tariffs and block imports and investments from countries using coercion with member states,” said Saint-Jacques. “This is clearly directed at China. For Canadian barley growers, they need predictability as much as possible. I have suggested a few things to our government in this regard.” For starters, Saint-Jacques said victims of tariffs should immediately contact the WTO. He also feels Canada should adopt a law such as that in the EU regarding coercion. “Finally, I think the time has come for an agreement among Canada, Australia and the United States. This would state that if one of them is a victim of unjustified tariffs, the other two promise they won’t take advantage of the situation and will limit exports to their historical share of the market. This would send a message to China that dividing and conquering no longer works.” If it sounds like there is undue focus on China, the former ambassador is quick to dispel the notion. “A Chinese proverb states that, ‘You kill the chicken to scare the monkey,’” said Saint-Jacques. “When China imposes these excessive tariffs, they want to send a message to other countries that they better not cross them. Anytime that China strikes like this, we must respond assertively, and at some point, they will hopefully get the message and back off.” Given the fragile nature of trade relations these days, a warning about putting all our eggs in one basket may be timely. “This is all about not being complacent,” said Sereda. “We need a responsible approach to addressing these export problems before they occur.” As Sereda sees it, to ensure we are not completely dependent on one market for barley sales is a form of risk management. It is a responsible action for organizations such as Alberta Barley that work for the benefit of barley farmers. “We recognize the stakes are high, and that is where efforts to expand our reach come in,” said Sereda. “Selling to China will always be part of our approach, but to ensure long-term success, we want a global market competing for our product.”