ICE Canola Weekly: Don’t expect China to buy if Huawei exec goes free

WINNIPEG, (MarketsFarm) – Intercontinental Exchange canola traders have been keeping a close eye on the extradition hearing for Huawei executive Meng Wanzhou in Vancouver. The hearing is to determine whether Meng will be extradited to the United States, where she is facing charges related to violating U.S. sanctions against Iran. Meng was arrested by Canadian authorities in December 2018 at the request of U.S. authorities.

Should Huawei chief financial officer end up being released to go home to China, as a trader believes the canola markets won’t see the effects right away.

Ken Ball of PI Financial in Winnipeg, Man. said it’s very likely that China would hold off from buying larger quantities of canola in the immediate aftermath.

“China has a history of doing what’s in their best interests, not ours,” he stated.

Ball pointed to China’s recent inaction in purchasing large quantities of United States soybeans after signing the Phase One trade agreement last week.

“China is obviously hanging back in the wings. Because that’s the way they get the best market impact,” Ball explained.

He believes there could be a reasonable chance that Meng may not be extradited to the U.S., where she’s facing charges relating to violating sanctions against Iran.

Meng’s defence has argued the crime she’s alleged to have committed is not illegal in Canada. For someone to be extradited the principle of double criminality must apply, that being the alleged crime must be illegal both in the country seeking extradition and the country holding the accused.

However, crown prosecutors have argued that the Huawei chief financial officer isn’t charged with violating U.S. sanctions against Iran, rather she is charged with bank fraud. Prosecutors accused Meng of lying to international bankers about Huawei’s business dealings in Iran, and that constitutes fraud.

Although China has not completely banned canola imports from Canada, they have certainly been substantially reduced, as data from the Canadian Grain Commission CGC) shows. As of November, canola exports to China in the 2019/20 marketing year amounted to 473,100 tonnes. That’s a 71.0 per cent drop from 2018/19.

However, total canola exports as Jan. 12 of 2019/20 were at 4.02 million tonnes, about 8.8 per cent off of previous year’s pace.

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