Canola needs more funds to counter Chinese uncertainty

China is a conundrum in world trade.

It is the world’s second largest economy and second largest population.

It is a no brainer that any exporting country should work hard to have access and close relationships with such a huge market.

On the other hand, China has repeatedly used access to its market as a tool to coerce other countries, including Canada, to bend to its demands.

Alas, the United States under president Donald Trump has started to go in this direction as well, but that is a topic for another column.

The canola sector is relieved that prime minister Mark Carney brokered a deal trading Canadian access for some Chinese electric vehicles for China’s restored access for canola and other food products.

However, how long will it be before another issue arrives that triggers Beijing to block canola?

I try not to be a purveyor of gloom and doom, but I think we can’t ignore the possibility of China moving to take over Taiwan.

China’s military has ramped up its threats to Taiwan, including a huge military exercise in December.

The Chinese nationalists lost the civil war in 1949 and fled to the island, but the communist government in Beijing never recognized Taiwan as separate, and in recent years has been building the capability to retake it.

Some analysts believe China plans to have forces in place by 2027 to successfully take the island.

Such a takeover is not inevitable, but think of the chaos to the world economy and trade that would likely be triggered by such an act.

It would be far reaching, but if we drill down to focus only on canola, we see that complacency regarding market diversification is foolhardy.

The risk of losing access to China again and the difficulty of building new canola markets means the industry here must go beyond its established market development program.

The budget for promotion should increase dramatically to get canola and its products before potential users around the world.

Getting more money from a sector suffering reduced revenue won’t be popular, but if markets are not expanded and diversified, revenue could be reduced even more.

Clearly there is also a role for government to help fund this, so it was good to learn Feb. 10 that Ottawa is allocating $75 million for two agrimarketing diversification streams over five years.

However, considering the money is for farm goods and fisheries, that is pretty paltry compared to the billions the auto sector is getting.

The increased money is needed because the task is complex.

Relatively few countries have canola and rapeseed crushing infrastructure, as noted in a recent paper by postdoctoral associate Farzana Shirin at the University of Calgary with Guillaume Lhermie of the U of C’s veterinary faculty and William Ridley, associate professor at University of Illinois Urbana-Champaign.

Many countries are more familiar with palm and soybeans as their oilseed of choice.

Europe has a large crushing infrastructure, but it is also a major producer of canola, and its members have restrictions on genetically modified crops, which limits Canadian canola to the EU biofuel market.

Canada’s domestic crushing industry has been expanding, largely in hope of targeting the U.S. biofuel market, but it might also have success selling canola oil and meal to countries without their own crushing capacity.

Recent developments in American biofuel regulations appear to be favourable for Canadian canola oil, but uncertainty over the past year caused several Canadian companies to put new crushing capacity on hold.

The paper by Farzana Shirin suggests Ottawa ensure that its clean fuel regulations closely match American policy so that crushers can sell to growing domestic and American biofuel sectors.

However, there must also be a system for oil to be exported offshore, and that will require improvements in rail and port infrastructure.

A step forward was the opening last fall of the DP World transload facility on the Fraser River port at Surrey, B.C.

It is capable of shipping a million tonnes of canola oil a year.

Richardson has contracted to be the main user, and it planned to ship oil to U.S. biofuel makers, but the uncertainty on American biofuel regulations stalled that business.

I hope it can soon resume, but the increased promotions budget is need so that oil and meal can be shipped to other users around the world.

The canola industry has been wise to fund studies into using canola oil and meal in the fast growing aquaculture feed sector.

That research shows canola oil and meal have strong benefits for aquaculture.

This is the type of information that must be put before potential users regularly and convincingly to stabilize and increase demand.