An American court recently approved a $1.5 billion settlement paid for by Syngenta that will send money to hundreds of thousands of farmers and others in the grain system who sold corn with the Agrisure Viptera trait before it was approved to send to China.
The resulting furor in 2013, resulted in an impact on corn prices, disrupted trade and cost corn sellers in the range of $3 billion when China rejected American corn shipments.
The example is a good lesson in the giant stakes involved in managing global commodities and economies based on exports. The potential for regulatory and governmental interference is huge.
No one argued that Syngenta’s Agrisure Viptera trait posed any sort of health risk. In fact, the industry would be better served in Ontario today, if the Bt trait had been spread through more corn hybrids on the market. It’s the only trait remaining that has any activity on the Western Corn Borer, now the most economically significant corn insect pest in Ontario.
Earlier this decade, it was simply another company’s entry into the genetically modified corn trait market that dominates most corn planted in North America.
But timing was everything with Chinese regulators, and the growing impact the country was having on global corn and soybean markets. The misstep of taking the product to the market early was costly for all involved. Again, there was no health or safety risk, it was all about regulatory risk.
Canadian agriculture knows all about regulatory risk. Europeans have kept out our beef based on hormone implant restrictions. Country-of-Origin labelling in the United States for years changed the number of hogs and cattle moving to the United States to the detriment of Ontario and other Canadian producers.
Pulse acres on the Prairies are declining due to decisions in India to initiate tariffs on imported pulses to help support Indian growers to the detriment of international trade.
Like many trade irritants, change can come quickly on political or regulatory hurdles. The biggest game of trade irritant chicken is currently the soybean war between China and the United States that is costing farmers billions and rearranging years-created trade routes around the world.
The question is if historical trade routes and relationships will be re-formed when the dispute between China and the U.S. ends.
The bottom line is that trade games are extraordinarily high stakes and will become even more so for Canada if we continue to grow our commitment to feed the world and increase exports.
We have no choice but to increase our ties to the rest of the world if our commodity crops are going to continue to find a home. The good news is that we’re producing more of them all the time. This year’s soybean harvest was a record average yield of 54 bushels per acre in Ontario. With a bit more than half of the corn acres reported to Agricorp, they were looking at an average production of 181 bu. per acre, well more than the 10-year average of 170 bu. per acre for those same growers.
There will be up and down years, and soybean yield hasn’t grown at the same rate as corn, but the long-term trend is there.
According to the Canadian Agri-Food Trade Alliance, Canada exports half of our beef/cattle, 70 per cent of our soybeans, 70 per cent of our pork, 75 per cent of our wheat, 90 per cent of our canola and 95 per cent of our pulses.
That’s an immense risk factor for our economy and our farmers. It means we have to approach trade and international relations in a different way from, say, our neighbours to the south. They have a large population that eats through most of what is produced in the United States. They have weight to throw around.
Canada needs to be nimble and strategic and surgical in our interventions. That’s increasingly tough in a world where the big players are throwing full body checks (see Huawei and its chief financial officer arrested in Canada).
The export imperative for most of our products means that Canadians will have to tolerate our doing things differently from other countries, even if it seems easier to just go along. That means we need our politicians to be thick-skinned and ready to do what’s best for Canada, even if it means ruffling other countries along the way.