Good morning.
I have been a grain producer in the Saguenay—Lac-Saint-Jean region since 1987.
We were pleased to accept the invitation to appear before the House of Commons Standing Committee on Agriculture and Agri-Food.
As farmers in Saguenay—Lac-Saint-Jean and canola producers, we are directly affected by the canola crisis.
The first rumours of a canola ship being rejected in China began circulating in mid-February 2019, followed by confirmation by the Chinese authorities on March 1. The impact on canola futures contracts, and therefore on canola prices, is very clear.
Between February 4 and 8, 2019, May canola prices were stable at around $492 per ton. The market decline began during the first week of April. The May contract closed at an average of $457 per ton. That is a price drop of $35 per ton in two months, a loss of more than 7%, due to the closure of the Chinese market.
It is true that Quebec canola is not intended for export. It is mainly used locally by the Bécancour crushing plant, but the local price structure is tied to the future contracts. As a result, Quebec canola producers are being hit hard by the dropping prices.
On top of the measurable exchange prices and losses, we are also affected by the uncertainty surrounding access to the Chinese market. Indeed, China is a major market for Quebec soy beans, both GMO and non-GMO. Despite the statement that the conflict with China is limited to canola, grain trading is undeniably affected by this perception of risk hovering over the Canada-China trade relationship.
Markets dislike uncertainty. We hear from various sources that soy bean trading has slowed down in Quebec, which could result in a substantial increase in end-of-season stocks. It should be noted that Quebec canola producers are also major soy bean producers.
Further collateral damages are looming on the horizon. According to Richardson International's President, canola acreage in Western Canada could decline by 10% this year. This would mean that more than 900,000 hectares normally reserved for canola would be seeded with other grains, mainly cereal grains. That could lead to a surplus in Western Canadian grain production in 2019-2020, which would result in lower grain prices in Quebec, since we operate in a North American free market for grains.
As mentioned earlier, the canola issue must be seen as another layer of problems that are harming canola producers in Quebec.
Thank you very much.