Like the US, Canada has some trade disputes of its own with China. But one area where Canada’s trade is surging is in wheat exports to the Asian country. For the marketing year just ended in June, Canadian wheat shipments to China jumped 83% to 2 million tonnes from a year earlier, according to data from the International Grains Council. Canada’s wheat exports to China in 2018/19 were the strongest since 2004.
The geo heat maps above show readings of NDVI anomalies for a top wheat-producing district in Saskatchewan. The map on the left is from July 2018 and the map on the right is from July 2019. Rains in mid-June this year accelerated greening and crop development ahead of last year’s pace.
According to a recent report from the USDA’s Foreign Agricultural Service, Canada now accounts for more than 60% of total Chinese wheat imports, nearly double the share from last year. China has traditionally purchased large volumes of wheat from Australia, but severe drought conditions have led to a sharp reduction in exportable supplies. Australia was even forced to import a shipment of wheat from Canada in June to meet domestic needs.
In addition, Chinese purchases from the United States have dried up due to the ongoing trade war. Last year, China imposed a 25% tariff on wheat imports from the US. With the usual trade partners out of the picture, Chinese millers have turned to Canada to source their high-protein wheat.
The wheat trade between Canada and China stands out in the wake of several trade-related incidents between the two countries this year. In March, the Chinese government revoked the import licenses of two Canadian canola companies, claiming shipments contained pests and fungi. In June, China banned all Canadian meat imports after forged customs documents were found on pork shipments. Diplomatic relations between Beijing and Ottawa have been tense following the arrest of Chinese telecom company Huawei’s chief financial officer in December.
The chart above shows monthly wheat exports from Canada to China. In the latest marketing year, spanning July 2018 to June 2019, accumulated exports rose 83%.
For the current season, for which the harvest is just underway, total Canadian wheat production is expected to rise 3% to 32.7 million tonnes. Yields are expected to return to trend after a down year last year. Following a dry start to the current year, much-needed rains in June helped alleviate worries this might turn into a second straight year of poor output.
Saskatchewan and Alberta are the key growing regions, producing about 77% of Canada’s wheat. NDVI measurements from Gro’s database show normal readings for both provinces for June and July. (NDVI is an important, satellite-based indicator of vegetative health.) This year’s good crop will allow Canadian producers to continue to meet foreign export demand. The USDA currently expects Canadian wheat exports of 24 million tonnes in the 2019/20 marketing year, down slightly from a record high of 24.5 million tonnes in 2018/19.
The chart above shows Canadian wheat production by province. Saskatchewan has long been the top wheat-growing region in Canada, followed by Alberta and Manitoba.