Government aid may be needed for canola growers, says analyst

China situation will drag on and stocks of unsold canola will continue to mount, says trade expert

With no end in sight to China’s ban on their biggest money-making crop, Ottawa may have to offer financial aid to canola growers, says an ag trade expert.

“There will likely be discussions of compensation for canola farmers,” said Sarah Pittman, a policy analyst with the Canada West Foundation in Calgary.

“I’m not sure we are at that point yet, but we might get there. I have heard talk about the idea of compensation because this is starting to look like it’s going to be long term.”

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Any hopes that Beijing will lift its ban on Canadian canola seed any time soon have pretty much gone out the window, she said.

“We are unfortunately looking at a longer timeline than we thought in the beginning. I don’t think it’s going to be decided before harvest and there’s a huge stockpile of canola already.”

China had been the biggest buyer of Canadian canola seed, buying about 40 per cent of exports until imposing the ban — widely believed to be payback for the arrest of Huawei executive Meng Wanzhou in December on a U.S. extradition warrant. Her trial is expected to last for many months, and Beijing is unlikely to lift its ban during that time, said Pittman.

Alberta Canola chair John Guelly isn’t expecting any resolution soon, either.

“Right now the relationship is not very good and they are not responding to our requests, so that makes it very difficult to get things done more quickly,” he said. “We are in a whole different ball game.”

Meanwhile, the mountain of unsold canola continues to grow.

Ag Canada predicts 4.3 million tonnes will be sitting in elevators or farmers’ bins by the end of the crop year (which is July 31). But many industry experts think that is low, and the actual carryout will be far higher.

Guelly, who farms near Westlock, said he knows neighbours who are looking into buying additional storage.

And many are worried about the condition of the canola they’ve been storing since last fall.

“Some of it isn’t in the most storable condition after the poor fall we had last year combined with the smoke which delayed the crop and the snowfalls we had in September,” he said.

“This summer the weather has been relatively cool so that has been good for storage. But producers are certainly going to have to keep an eye on their bins and rotate or aerate them.”

And with an average to above-average crop expected in much of the province, farmers are wondering what they’ll do come harvest.

“It’s going to present some storage issues,” said Guelly.

What lies ahead?

While both the canola sector and Ottawa are trying to boost sales to other countries, short-term opportunities are limited.

“Finding just one market that is going to fill the China void is pretty impossible,” said Pittman. “I think you are going to have to look for a number of markets that can do that. Pakistan has been on the rise recently; (but) they certainly do not have the size of China.”

Increasing domestic use should also be a goal, said Guelly.

“We have been trying to push the (federal) biofuel mandate from two per cent to five per cent so more canola is used domestically,” he said, adding no biofuel processors here are utilizing the newest canola-to-biofuel technology.

“There are a few being proposed but it’s a matter of getting those facilities built and having somebody invest in them. If we could get the mandate raised I think that would create incentive for companies to build these facilities with the new technology.”

The only immediate relief has been an increase in the federal cash advance program, with the maximum loan amount now at $1 million (with $400,000 interest-free for growers with that much canola in storage).

At this point, Guelly isn’t calling for direct government aid, but he said growers aren’t in a position to stop growing canola, even though it is an expensive crop to grow.

“It’s very hard on farmers’ pocketbooks to take canola out of that equation,” he said.

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