Canada’s canola industry appears unsure what to make of last week’s federal announcement of additional export insurance.
Agriculture Minister Marie-Claude Bibeau, International Trade Minister Jim Carr and Export Development Canada executive vice-president Carl Burlock said $150 million in additional insurance would be offered to help canola sellers move into new markets.
The insurance would “mitigate the risk of selling into new markets and make it more likely they can access working capital from their partners,” Burlock said.
Canola Council of Canada vice-president of public affairs Brian Innes said the industry had been in discussions with EDC about how it might help but had not specifically asked for the additional insurance.
“It’s unclear to us what it means,” he said after the June 13 announcement. “We would need to see the details to understand how it could help.”
Later, he said the $150 million could be used to cover shipments for a month or two at a time, meaning it would cover much more than that value.
Burlock said Pakistan and Bangladesh were both possible destinations for Canadian canola as the industry struggles through a trade dispute with China, its largest customer at $2.7 billion worth each year.
Innes said Canada has sold canola to both those countries in the past and they do have some capacity to crush canola seed. However, they also present higher risk than existing customers.
“Around the working group we have been discussing how new customers can create additional risk,” Innes said. “That risk can be so high that it prevents sales to new customers. Risk insurance offered by EDC is one way that exporters are able to make sales and there has been discussion about how EDC services could be adapted to help us move canola to non-traditional customers.”
Many canola exporters typically haven’t used EDC insurance.
Paterson Grain senior oilseed merchandiser Dwayne Couldwell told Reuters that he hadn’t used it because the premiums were greater than the profit.
“I’m fully supportive of the concept but unless it’s considerably different than the former EDC financing it’s just too expensive for the profits we can generate on the export market,” he told the news agency.
Innes said resolving the trade issue with China is the first priority, and diversification, domestically and internationally, comes after that.
Moving more canola into Europe and the United Arab Emirates is also on the agenda because those countries, along with Pakistan and Bangladesh, have additional crush capacity.
Demand in Europe is strong this year because of a small crop there. Two-thirds of all the canola crushed in Europe goes into biofuel, Innes said.
There is talk about building more capacity in Canada, but a new crushing plant would cost more than $300 million and there is always the risk of overbuilding.
“There is a lot of excess capacity in China, so while Canadian plants are virtually at or near capacity, China has a massive amount of unused capacity normally and of course now they have a lot,” he said.
Boosting the domestic biofuel requirement to five percent renewable content would use 1.3 million tonnes of seed.
At the news conference, Carr was asked if the decision to help exporters diversify was an admission that the dispute with China can’t be resolved. He said diversification is “good, old-fashioned common sense.”
China blocked shipments from Richardson International and Viterra in March saying they contained pests but most believe the move was retaliation for Canada’s detainment of Huawei executive Meng Wanzhou under an agreement with the United States.