Canadian Farmers Gain In Short-Term From Errant U.S. Trade War
The trade war with China may be doing nothing but harm to U.S farmers, but they are helping to make Canadian agriculture great, at least temporarily.
Make no mistake, Canadian agriculture is also undergoing pressures - including its own Chinese trade restrictions, largely stemming from Canada’s arrest of a Huawei executive who is also the daughter of the company’s CEO. The dispute has led to China cutting off its canola purchases from Canada.
But in a number of areas - including lobster, wheat and soy - Canadian farmers and lobster men have derived short-term gains from U.S losses.
While U.S lobstermen have seen sales to China drop about 80 percent in tons, their Canadian competitors are enjoying a banner year. Canadian lobster exports to China as of June were already almost as great as the entire previous year, with sales of $200 million almost equal to the $220 million in sales all of last year.
Given that there is no difference between lobster off the shores of Maine and lobster off the shores of the Canadian province of New Brunswick, the Maine lobster industry is especially vulnerable to such a large downtick in sales to such a large market as China.
The decline in sales to China has been especially difficult for the U.S lobster industry, which had seen a 20-fold increase in sales to the Chinese since 2010. A number of Maine companies have had to lay off workers.
The shift from Maine to U.S lobster is only one harmful impact that the trade war has had on U.S natural resource industries. While U.S wheat sales sunk to their lowest level in 11 years, as of April China’s wheat purchases from Canada were double what they had been in the same period a year earlier. In fact, they reached their highest level since 2005, according to the Canadian Grain Commission.
Canada and the United States are in direct competition as the world’s largest producers of protein wheat, which provides the gluten strength necessary for baking. Australia’s high-protein wheat has suffered from drought.
In soybeans, even as U.S soy farmers found themselves shut out of the China market, Canadian exports soared 80 percent last year. Sales to China used to constitute a third of Canada’s total soybean market. It is now 60 percent. The shift in the soy market was especially tough on U.S producers - losing their best export market after a banner year in growing the crop.
But make no mistake, in different ways the dramatic drop in U.S soybean sales has hurt all soy suppliers, including Canadians. China’s tariffs have forced a drop in U.S soybean prices, to which Canadian soy prices are linked, from $10.50 to $8.95 a bushel.
Moreover, the sharp reduction in sales to China have driven U.S soy farmers to other markets to make up for the drop in sales of 30 million tonnes. Canadian farmers have been forced to compete with U.S producers, who have had to bring down their prices significantly, in several lucrative markets. The amount of U.S soybeans heading north increased 52 percent in 2018, at sharply reduced prices. Meanwhile, Canadian soy exports to the EU declined by 45 percent.
More than anything else, Canadian farmers are concerned that the good fortune the U.S-driven has bestowed on them simply will not last. They fear becoming tied to the China market and losing their foothold elsewhere, such as Europe. More than anything else, they yearn for sales stability
But, like their U.S counterparts, they may have a long wait. Trade wars may be easy to start, but they are are difficult to finish. And they all have one thing in common - they have no winners.