October 20, 2018

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Wheat woes grow

Saudi Arabia adds to long list of countries with trade barriers

Reports that Saudi Arabia will stop accepting Canadian grain as part of the diplomatic spat between the two countries come as more bad news for producers who have been on the wrong end of disruptions.

The grain shipments have become collateral damage in the dispute that arose after Global Affairs Canada tweeted concerns about the arrest and detention of a female blogger and activist in Saudi Arabia.

Canadian Foreign Affairs Minister Chrystia Freeland is adamant that Canada will not step back from its comments on human rights.

The sheer volume of Canadian grain exports to Saudi Arabia is not necessarily significant — less than 70,000 tonnes of wheat and about 135,000 tonnes of barley this year — but it is troubling for an industry that is encountering more numerous tariff and non-tariff trade disruptions around the world.

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Reports that Saudi Arabia will stop accepting Canadian grain as part of the diplomatic spat between the two countries come as more bad news for producers who have been on the wrong end of disruptions.

The grain shipments have become collateral damage in the dispute that arose after Global Affairs Canada tweeted concerns about the arrest and detention of a female blogger and activist in Saudi Arabia.

Canadian Foreign Affairs Minister Chrystia Freeland is adamant that Canada will not step back from its comments on human rights.

The sheer volume of Canadian grain exports to Saudi Arabia is not necessarily significant — less than 70,000 tonnes of wheat and about 135,000 tonnes of barley this year — but it is troubling for an industry that is encountering more numerous tariff and non-tariff trade disruptions around the world.

"We are seeing a significant rise in protectionism and trade is becoming more difficult," said Cam Dahl, president of Winnipeg-based Cereals Canada, the national not-for-profit group that represents farm organizations, grain handling and export firms and crop development and seed companies.

"It seems like every second week there is a new country added to the list of countries where we have market-access issues," he said.

"If you would have asked me last week if there was any contract risk or market risk into Saudi Arabia, the answer would have been no."

(Charlie Riedel / The Associated Press files)

(Charlie Riedel / The Associated Press files)

 

Canada’s durum wheat sales to Italy — about one million tonnes — have virtually disintegrated over the past year. There have also been new trade barriers that Canadian exporters are facing in India, Peru and Vietnam.

Japan, one of the largest importers of Canadian grain recently shut down its marker for a few weeks over an issue regarding genetically modified grain.

A spokesman for International Trade Diversification Minister Jim Carr said the extent of the trade freeze with Saudi Arabia is not yet clear.

"It seems like every second week there is a new country added to the list of countries where we have market access issues." -Cam Dahl, Cereals Canada

 

"Right now, we are very much seeking clarity on the Saudis’ intentions on a number of issues," he said. "We have seen the reports. We are looking for confirmation and clarity."

There are also reports that Saudi entities are being ordered to divest Canadian assets.

In 2015, a new company called G3 Global Holdings Limited Partnership was formed in Winnipeg as the successor to the Canadian Wheat Board. G3 is a partnership between Saudi Agricultural and Livestock Investment Company (SALIC) Canada Ltd. and Bunge Canada, a division of U.S.-based Bunge Ltd.

After the original investment of $250 million, SALIC increased its stake in the company that operates a growing network of grain-handling elevators across Western Canada.

The company is also in the process of building a state-of-the-art grain terminal in North Vancouver, the first new grain terminal constructed at the Port of Vancouver since the 1960s.

Bloomberg has reported that a G3 company spokesman said it continues to operate as "business as usual."

(Charlie Riedel / The Associated Press files)

(Charlie Riedel / The Associated Press files)

 

It is not clear how much, if any, of the Saudi exports had been handled by G3. One industry officials who was asked said, "If I was guessing, I would say they did handle some."

But considering there are 16 million tonnes of Canadian wheat exported, the diversion of 200,000 tonnes from Saudi Arabia is not a particularly large hit.

Wade Sobkowich, executive director of the Western Grain Elevators Association — an organization that G3 is in the process of applying for membership in — said there is an impact.

"But really, in the grand scheme of things, it is small potatoes given the size of the different markets we ship into," he said.

"We don’t like it any time that a potential competing stream is removed from those that we can trade with to try to get as much value as we can for the grain that farmers grow."

martin.cash@freepress.mb.ca

 

Martin Cash

Martin Cash
Reporter

Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.

Read full biography

History

Updated on Wednesday, August 8, 2018 at 10:06 PM CDT: adds edits

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