Canada must work to stay ahead of wheat markets

Canada sells a lot of wheat, but we cannot take our position in the wheat trade for granted.

Canola has been getting a lot of attention lately, mainly because of its export growth and China’s obstinate moratorium, but it’s interesting to note that Canadian wheat exports to China are on a record pace this year.

Canadian wheat exports for 2019 are projected to hit a record 24,500 tonnes, up almost 48 percent from 2010, even topping last year’s record exports of 24,400 tonnes.

These are positive signs for the near term, but it’s important to look at the state of wheat’s position in world markets since Canada is the second largest exporter after Russia. (Canada’s wheat exports were valued at $5.7 billion in 2018.)

Australia, once a wheat-exporting powerhouse, is now the world’s seventh largest exporter, in part due to weather — the country has been plagued by drought — and in part because wheat is the most competitively grown and exported crop in the world.

So loss of market share can happen. Wheat is considered a mature market, but opportunities are developing. Bangladesh, for example, has increased wheat imports threefold since 2012. It is now the fifth-largest importer in the world. There are also good opportunities for growth in wheat exports to Egypt, Indonesia and Algeria.

The anticipated growth in developing countries is expected to generate more demand for meat, which will necessarily require more wheat for feed.

The Food and Agriculture Organization of the United Nations expects the demand for wheat will grow by 30 percent by 2050.

Wheat stocks are stable, and world output is rising, so it would be folly for Canada to ease off the throttle in pursuit of markets.

Canada must be aggressive to be competitive in emerging markets, especially for milling quality wheat, for which Canada is a prolific source.

The federal government is pursuing trade agreements to push exports. There are now 14 agreements covering 51 countries, and once deals with the European Union and the 10 Pacific nations, including Japan, are ratified, trade deals will cover 60 percent of the world’s economy. (The CPTPP permits a 30 percent increase of quota wheat to Japan over six years, with a reduction of import tariffs by up to 50 percent.) Trade talks are also under way with other Asian countries and with Latin America.

Canada has 160 trade commission offices in place, but more may be needed with the increased demand of emerging markets and more intense competition. There are nine trade commissions in the United States, for example, but just one in Bangladesh.

In particular, the Black Sea region is poised to export more wheat. Exporters in the region have an advantage due to proximity to the Asian markets, but not with quality. Some importers are blending lower-quality wheat from the Black Sea region with higher quality Canadian wheat, so it’s clear that quality must be an area of focus for Canada since it provides a competitive advantage.

The federal government has targetted a boost in agri-food exports by 30 percent by 2025 from 2017. To do that, Canada must invest in trade offices and trade missions to enhance global marketing.

It doesn’t all have to happen at the federal level. Saskatchewan, which grows almost half of Canada’s wheat, is opening trade offices in Japan, India and Singapore.

Canada does not match agricultural supports in the United States and the European Union but there is opportunity to aid in marketing internationally.

Canada is a successful wheat-exporting nation, but as markets change, a lot has to go well to maintain its position.

Karen Briere, Bruce Dyck, Barb Glen, Brian MacLeod and Michael Raine collaborate in the writing of Western Producer editorials.

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