Canada & China: Dependence on China for barley exports seen as risk for Canada

More than 80 percent of Canadian exported barley is shipped to one country, potentially elevating trade risks, The Western Producer reported on September 8.

Canada has become dependent on China for barley exports.

In the 2020-21 crop year, Canada exported about 3.7 million tonnes of feed and malt barley.

Nearly all of that, close to 90 percent, was shipped to China.

“It’s been above 80 percent of our exports, for combined feed and malting barley, over the last few years,” said Peter Watts, managing director of the Canadian Malting Barley Technical Centre in Winnipeg.

Depending on one country for exports is rarely a good idea. But it’s especially risky when that country is China.

In December 2018, Canadian officials arrested Meng Wanzhou, the chief financial officer of Huawei, at the Vancouver airport. The United States justice department had accused Meng and Huawei of breaking sanctions on Iran, so Canada arrested her on behalf of the U.S.

Shortly after, China banned canola imports from two major grain handling companies in Canada. Canola seed exports to China dropped off a cliff and Canada’s canola industry had to find alternative markets.

That sort of diplomatic spat is a concern for Canada’s barley sector.

“That’s definitely a risk and definitely on our minds,” Watts said.

In February, the federal government invested $960,000 to help the barley sector develop new buyers and expand existing markets for malt and feed barley.

“Canada is recognized worldwide for producing high-quality malting barley. To remain competitive in the global marketplace, the industry must continue to build on this reputation, expand its customer base and promote new varieties,” Agriculture Canada said in a release.

Watts clarified that the C$960,000 will be used to find new markets and expand demand for Canadian barley.

Shifting sales away from China is not easy. Australia is also seeking new buyers for its malt and feed barley.

In May 2020, China imposed an 80 percent tariff on Australian barley. Many have speculated that China introduced the tariff to punish Australia, as Australian leaders were lobbying for an independent investigation on the origins of COVID-19 in China.

Australia exports about 70 percent of its barley production and is usually the largest exporter in the world. The Chinese tariff has re-shaped the global flow of barley. China is now buying more barley from Canada and France, and Australia has been shipping barley to non-traditional markets.

“Last year they exported two or three cargoes of malt barley to Mexico, for I think the first time,” Watts said.

Those shipments represent direct competition for Canada, because Mexico is desirable market and could become a much larger buyer of Canadian barley.

“Mexico is already a huge market for Canadian malt. It’s almost tied for our second biggest market with Japan, after the U.S.,” Watts said.

Canada shipped a couple of cargoes of malting barley to Mexico in the 2019-2020 crop year. But then the pandemic arrived, followed by the 2021 drought, cutting into barley production across the Prairies.

“Hopefully, this year we’ll have that opportunity again,” Watts said.

Another potential market is Brazil.

The country has traditionally bought malt from Europe and Argentina, but the market is sizable and there could be an opening for Canada.

“Brazil (is) the third-largest beer market in the world and a huge barley and malt importer,” Watts said. “But traditionally, it hasn’t been one of Canada’s export markets.”

Building relations with new buyers takes time because they may be unfamiliar with Canadian malting barley.

Canadian exporters should have more malt and feed barley to sell this fall and into 2023. In late August, Statistics Canada pegged 2022 barley production at 9.4 million tonnes, up 34 percent from last year. Yields should be closer to normal and much better than 2021, when the severe drought pushed average yields down to 43 bushels per acre.

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