Sino-American fight hurts

The American government has offered its farmers about the same amount in commodities grain assistance, due to trade issues with China, as is the size of Canada’s grains and oilseeds sector.

So far the United States federal administration has put in place US$28 billion, and paid out $8.6 to compensate its farmers. The American business is about 10 times that of Canada’s. It would hard to imagine a scenario where the Canadian federal government, with its provincial partners in a 60-40 split, would pay out C$3.5 billion.

Saskatchewan being on the hook for $800 million in ad-hoc payments wouldn’t work well with that province’s balanced-budget plans. It might be an easier sell in Manitoba and Alberta. The Canadian federal government has said that AgriRecovery, and that platform’s ability to make compensatory payments to producers, might be needed if our own trade issues with China don’t straighten up. The provinces haven’t warmly received that news.

American farmers will likely turn to more corn next year, as there may in fact be too little of it around to keep buyers bidding hands in their pockets causing the price to rise into the 2020/21 crop year. That, and without opportunities to sell soy to China, corn will be the more profitable crop. With even 40 percent of American acres in soy and the negative influence on the price caused by large the U.S. subsidies, it will put a chill on oilseed prices everywhere and will cause farmers here hurt, even if Canada does manage to resume canola trade with China or find a new home for the crop in Europe (see our page 1 story by Sean Pratt this week).

China does appear to be warming to the cool Canadian approach to our relationship issues. Last week Foreign Minister Crystia Freeland was finally able to speak with her counterpart, Wang Yi, on the sidelines of a foreign ministers’ meeting in Bangkok where he committed to “continued discussions.”

As well as speaking about detained Michaels Kovrig and Spavor, canola was also raised, said Freeland on Friday.

The rough-tough stuff strategy that the U.S. is employing with China might not be as effective at getting trade moving as it is in garnering support from the Republican-base at a ballot box or political fundraiser. Meanwhile, China is inspecting Argentine soy crushing plants, as it seeks new supplies, and appears to be settling in for a long, cold winter of trade discontent.

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