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This article was published 24/7/2018 (478 days ago), so information in it may no longer be current.
Chinese ships are already reportedly showing up at Canadian ports to buy soybeans, thanks to the trade spat between the United States and China.
China, the world's largest buyer of soybeans, has stopped buying the crop from the U.S. after the Trump administration slapped massive tariffs on Chinese products.
China is looking to source supplies elsewhere and soybean growers in Brazil, Argentina and, to a lesser extent, Canada stand to gain.
This is not a peripheral gesture. Soybeans are the U.S.'s biggest crop in terms of value. It grows about 90 million acres of soybeans and produced 120 million tonnes in 2017. China purchased US$12 billion worth of soybeans from the U.S. last year.
"There have been anecdotal reports that we've already sold quite a few cargos of soybeans off the West Coast (to China), and a lot of that will be from Manitoba," said Neil Townsend, a senior market analyst with FarmLink Marketing Solutions in Winnipeg.
As well, people in the grain trade believe China will look to replace some of its soybean requirements by upping purchases of canola from Canada. Some market analysts estimate China may buy as much as 5 1/2 million tonnes of canola, which would break its previous record purchase from Canada by a million tonnes.
"Every available seed of canola could potentially be sold to China," Townsend said.
The danger is not knowing how long the trade war will last. "I think it will all get resolved, I just don't know if it gets resolved in six weeks, 26 weeks, 52 weeks, two years...," he said.
Earlier, China offered to purchase more soybeans and other agricultural products as a way to appease the Trump administration. If those are the terms of ending the trade war, that could negate any gains for Canadian farmers.
"What would that mean for Canada? There might be cancellations of cargos of canola (from Canada) and canola prices might drop 10 to 15 per cent," Townsend said.
The U.S.-China trade war has triggered a free fall in U.S. soybean prices. Soybeans on the Chicago futures market have dropped from US$10.40 per bushel in May before U.S. President Donald Trump launched the trade war with China, to about US$8.50 per bushel this week. Also contributing to weaker prices are very good growing conditions in North America and other parts of the globe.
However, the weaker U.S. price is also hurting Canadian farmers because prices are largely set on U.S. futures, Townsend said. "The price has gone down a bit (for Canadian farmers) but not to the same extent as in the U.S.," he said.
Canadian crop should eventually sell at a premium, such as the South American crop, said Marlene Boersch, managing partner at Mercantile Consulting Venture Inc. in Winnipeg. Boersch said the Argentine price for soybeans worked back to Vancouver is about $14 per bushel.
"We should be trading equal to the higher value. We're not seeing it in the market yet, but it will happen," she said.
The weaker Canadian dollar has also boosted returns on farm exports, which are sold in American dollars. Canada should also fetch some premium because it's closer to China than Argentina or Brazil. But Canada doesn't have nearly as much supply as those two countries.
On the downside, China is expected to reduce its reliance on soybeans and that will affect the entire oilseed market negatively, Boersch said.
"As far as I'm concerned, for Canada, as an exporting country overall, this is not good. We do a lot better when the rules are clearly defined," Boersch said.
Townsend maintained China is in the weaker position in a trade war with the U.S. "The Chinese are running out of ammunition in a trade war because the U.S. buys more stuff from China than China buys from U.S.," he said.
Meanwhile, the Trump administration is reportedly setting aside up to US$12 billion in assistance so its farmers don't bear the brunt of Trump's trade war with China, the European Union, Canada and others. Countries targeted with higher tariffs have shot back with tariffs on farm products like soybeans, meat and milk.
In China, the government is expected to compensate crushers if they are forced to buy from the U.S. and pay the 25 per cent tariff.
Trump triggered the trade wars by introducing high tariffs on numerous fronts as a way to improve his country's trade balance with other countries.
Bill Redekop has been covering rural issues since 2001.