‘Thank you, Donald Trump.’
Members of the recent New Crop Mission to Asia didn’t say those exact words. But the fallout from the belligerent U.S. president’s trade war with China is definitely one of the pluses that members of the mission encountered.
“The big difference this year is the trade environment,” Cereals Canada president Cam Dahl said in an early-morning phone call from Shenzhen, China on Nov. 22.
The crop missions are a joint effort by Cereals Canada and the Canadian International Grains Institute (with support from the Canadian Grain Commission) that sees industry reps, including farmers, visit a host of countries in November and December.
One of them was Terry Young, a Lacombe-area producer and Alberta Wheat director.
Although his team travelled to Japan and Indonesia, China’s shunning of U.S. grain was very much top of mind. Young was struck by comments from a senior Canadian grain merchandising official from a major grain company, who was also on that mission. He estimated China’s wheat purchases will top 600,000 tonnes by the end of the year, a 50 per cent jump over 2017.
The trade war between China and the United States is huge, added Dahl.
“That’s changing the name of the game in Asia.”
Another difference this year is the new Trans-Pacific trade deal, particularly the lowering of tariffs on wheat from Canada and Australia, two of the 11 member nations in the Comprehensive and Progressive Trans-Pacific Partnership.
However, the U.S. is not a member and — again — it goes back to Trump. One of his first acts after taking office was to withdraw from the deal.
“As of Dec. 30, that markup for Canada or Australia begins to decline by 16 per cent,” said Dahl. “It comes down by that amount. It doesn’t for the U.S. because it’s not part of the (agreement).
“We will have a major advantage going into Japan.”
Yet another factor is supply. While Mother Nature gave Prairie farmers a rough ride this year, she hammered Australia.
Severe drought has cut overall crop production in Australia by a quarter, with wheat production in the key wheat-growing area of New South Wales falling 65 per cent below the 20-year average.
“This year, the trade was somewhat on edge because Australia doesn’t have much of a crop to export,” said Young. “The only good-quality milling wheat is actually in North America this year. The Black Sea region doesn’t have great quality. So the only good crop is in North America.”
During the meetings Young attended, Japanese buyers were quite concerned that Canada would not have enough No. 1-quality wheat for them. They were also concerned about the price and the grade.
“They were never concerned about anything else, other than those three items,” he said. “Normally you get questions around deoxynivalenol (the mycotoxin caused by fusarium) in wheat.”
Japan bought 1.6 million tonnes last crop year, and is probably going to take well over two million this year, said Young.
Indonesia is very stable in its requirements, purchasing 1.7 million tonnes annually, mostly No. 2 wheat, he added.
“They like the Canadian characteristics of CWRS, they blend it with inferior wheats,” said Young. “They see value in that because CWRS has a lot of blending capacity. That’s why they use a lot of it.”
Getting to know us
Helping global wheat buyers fully understand what Canada can offer is at the heart of the missions, he added.
Young pointed to seminars for millers, bakers, and importers in both Japan and Indonesia, along with individual meetings with some of Japan’s bigger millers.
“When you’re in an individual meeting, there’s a lot more dialogue and there are no trade secrets,” he said. “It’s just a big group of millers and bakers. We do accommodate the millers and bakers in a separate meeting one on one so we can get their true evaluation. When you’re bringing over one million tonnes and are milling it, that’s huge.
“That’s one person taking an excessive amount of product. You’ve got to satisfy their needs.”
In Asia, establishing a relationship is critical to most trade deals, said Dahl. And the team approach is uniquely Canadian.
“Farmers come on all the missions and that sets the Canadians apart,” he said. “Other countries do things similarly, but Canada is the only country that takes the whole value chain.”
Various teams will travel to 17 countries in Latin America, West Africa, South Asia, the Middle East, and Europe.
“This is a significant undertaking,” said Dahl. “These are all the major customers that buy Canadian wheat. It is part of our customer service package.
“It’s to help our very good customers understand the quality of this year’s crop, and that the Canadian industry and the Canadian value chain is there to support them.”
Farmers from Alberta, Saskatchewan, and Manitoba will all be involved.
“We have the chairs of all three provincial commissions,” he said. “We have the chair of the Western Grains Research Foundation, so we’ve got good representation from farmers.”
Young said some producers have asked him why these missions are important.
“First of all, it’s information from us to them about our crop — the millers and bakers don’t want to spend a whole lot of time trying to find the best way to mill or bake our crop this year,” he said. “Secondly, there are more of these countries that buy our product and they trust in the product.
“That’s why the farmers go. We grow the product and they want to know how we grow it, they want to know our sustainability, they want to know how we store it, and that we store it in a safe manner.
“We are the start of the value chain for them.”