B.C. court rules against Meng while Canadian farmers hope against retribution

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The B.C. Supreme Court released its decision regarding the issue of double criminality in the extradition case of Huawei CFO Meng Wanzhou on Wednesday.

Associate Chief Justice Heather Holmes ruled the trial should proceed, saying the crime Meng is accused of by U.S. prosecutors would also be a crime in Canada.

Farmers in Canada have been following this situation very closely as they have not forgotten the punishment exerted on Canadian exports of canola, as well beef and pork temporarily, by the Chinese government following Meng’s arrest by Canadian law enforcement acting on a U.S. extradition request at the Vancouver airport in December 2018.

“The Canadian judiciary operates independently, and today’s decision on double criminality in Meng Wanzhou’s extradition process was an independent decision of the Supreme Court of British Columbia,” noted François-Philippe Champagne, Canada’s Minister of Foreign Affairs, following the B.C. court’s decision.

Instead of going back to China, Meng will stay under house arrest and the extradition trial will proceed with further appeals from her legal team.

In terms of the potential backlash, traders, farmers and commodity groups can only speculate how China will respond. Some commodities, such as canola, have suffered, while other exports have quietly flourished, and some have made their way into China in roundabout ways since December of 2018.

Canada’s two largest canola exporters — Richardson and Viterra — are still not allowed to ship canola seed directly into China, but what about the rest of Canadian agriculture? What do our recent exports to China look like?

Chuck Penner of Leftfield Commodity Research breaks down the situation for pulses, canola, wheat, and barley:

  • Chinese pea imports have been exceptionally strong this year. For January to April, imports are at a record pace of 759,000 tonnes compared to only 462,000 last year. Canada is the dominant supplier, with over 95 per cent of that total, but that also makes Canada vulnerable. China would have a hard time finding other suppliers though, with Black Sea origins the only other option. Other pulses are a non-issue in China.
  • Canola exports are off from last year, largely because China’s restrictions didn’t show up last year until March. So far in 2020, China has imported 893,000 tonnes compared to 1.52 million last year. The pace has been improving slightly in the past few months. For example, China imported 247,000 tonnes in April, with Canada supplying 186,000 tonnes.
  • Wheat exports have also picked up more in the past few months. Through the first four months of 2020, China has imported 1.51 million tonnes compared to 1.15 million last year. Canada is just one of numerous suppliers of wheat to China.
  • Barley is the other crop that could be affected significantly by any political moves. China’s imports are down this year but Canada is occupying a larger share than usual, mainly because of Australia’s two-year drought. Barley imports so far are 1.43 million tonnes compared to 2.54 million at this same time last year.

To add to Chuck’s commentary, China has recently targeted Australian barley imports in retaliation as the Aussies pursue an investigation into the origin of the COVID-19 pandemic (sound like a familiar tactic?).

On the cattle side, Brenna Grant from CanFax told us last week that Canadian beef exports to mainland China are down 51 per cent this year, but that’s in the context of a 300 per cent increase in the first half of 2019 and the COVID-19 pandemic hitting China in the first part of this year. Demand for beef in China is picking up as its economy recovers. Canada could also see some additional beef demand from China come online later in the year simply because of reduced volumes from other importing countries, such as Australia, she noted.

There’s certainly no guarantee China will retaliate against Canadian agriculture exports again. One good argument that they won’t is that farmers and farm groups don’t appear to hold much sway over the key political decision-makers in Ottawa. As Chuck noted, China also needs food ingredients that are grown in Canada.

While upsetting the Chinese government, the decision on Wednesday was welcomed by U.S. officials.

“The United States thanks the Government of Canada for its continued assistance pursuant to the U.S./Canada Extradition Treaty in this ongoing matter,” said the U.S. Department of Justice in a statement.

For the foreseeable future it appears that Canada will continue to be a proverbial ping pong ball between the U.S. and China in their economic battle that is heating up again heading into the summer.

Canadian farmers hope that the ball does not get crushed in the process. Time will tell.

Categories: China / Markets / Trade