OTTAWA, ONTARIO, CANADA — The global agriculture industry is facing at least a decade of turbulence as the world figures out how to deal with each other and compete in ways where there are some rules, Janice Gross Stein said during the Canadian Crops Convention.

“I am a long-term optimist who’s predicting a lot of turbulence over the next few years,” said Stein, who is founding director of the Munk School of Global Affairs and Public Policy, University of Toronto. “We have to prepare for those 10 years.”

The Canadian Crops Convention in early March held its first in-person event since 2020 in Ottawa, Ontario, Canada, with the theme of “Strategies for a Changing World.”

Stein said some of the reasons for her outlook include a drop in global trade coupled with increased protectionism. Globalization — that process of connecting markets through trade and investment — has stalled, she said.

The world is past the period of the 1990s and early 2000s that Stein called “globalization on steroids.” Markets functioned with the greatest autonomy that was ever seen in modern history. China opened up its markets and was in a period of its own development and anxious to access better technology.

“That period is finished,” Stein said. “We are in a new period where the big powers who set the framework will use markets for strategic purposes.”

Protectionism is on the rise, even in the United States under President Joe Biden’s administration, she said. When Biden was elected, people thought things would “go back to normal.”

"Global canola exports have been trending higher but the Canadian share has been dropping." - Chuck Penner, owner of LeftField Commodity Research

“Joe Biden’s administration has been the most protectionist administration in the last 30 to 40 years,” Stein said. “This is no small challenge for all of you in this room. Your biggest export market is the US, with 70% of what Canada sells still going into the US.”

Stein said there is great power competition between the United States and Russia and the United States and China, and all three are willing to use access to their markets as a tool in this competition.

“We all have to adjust,” she said. “We have to get the expert knowledge in place, and we have to work within that system to take advantage of what it means for us.”

To be successful in this changing world, the Canadian agriculture industry will need to build strong relationships with its trade partners. That means showing up, Stein said.

“You show up once, then you show up again, and then you have to show up again,” she said. “Showing up is the single most important prerequisite of success.”

This is particularly true in the Indo-Pacific region, which is the fastest growing market in the world for exports, Stein said. Canada has developed a strategy for the region that encompasses 40 economies, more than 4 billion people and is home to six of Canada’s top 13 trading partners.

“Markets are regionalizing,” said Stein, who was co-chair of the Advisory Committee on Canada’s Indo-Pacific Strategy. “You are now exporting into regional markets; that’s the mental shift.”

With the World Trade Organization and Codex, the international food standard setting body, dysfunctional, it will be regional organizations that step in to fill the void for trade regulation and standards, she said. This includes the Indo-Pacific Economic Framework (IPEF), which Canada has joined.

“If all the sectoral councils do not have IPEF in their sites, they’re missing the standard setting body that is going to shape what goes in and out of the markets in the Indo-Pacific,” Stein said.

Supporting sectoral councils such as the Canola Council of Canada and the Canada Grains Council, the hosts of the convention, will be needed to tackle the challenges the agriculture industry faces, she said.

“Give them the muscle so they can work to build up expertise on these markets,” Stein said.

Post-COVID China

Cynthia Xing, partner and vice president, Yuan Associates, agreed that deepening relationships is key, especially in China, which is entering its first post-COVID year. With a new administration in China, 2023 could be a good time to reengage with the nation, she said. 

“No matter how politicized and complicated doing trade with China is, the market demands are strong and continue to grow,” she said. “Showing up and keep showing up matters, but it is not enough. You may also need a multi-layer communication channel and platform to build awareness and trust. It is important to identify the true decisionmakers and to understand their real intention so you can come up with an effective business strategy.”

The nation rolled back its zero-COVID policy in December and is ready to put the virus in its rear view mirror, she said. 

“If you go out, the streets are full of cars, a lot of people traveled back to their hometowns during the Chinese New Year holiday,” Xing said. “However, all of those U-turns in our policies changed everything — the way we live, the way we do business and our mindset. People lost their confidence; it feels safer to save money rather than spending.”

China will focus on high-quality development including innovation, more added value and brand building, with a shift from made in China to innovated in China. National security also has been given more weight. 

“This indicates more preventive measures, along which food, energy, natural resources and supply chain security are highlighted,” she said. 

China will need to import a considerable amount of agricultural products every year, Xing said. But the nature of China’s demand for agriculture has shifted from emphasizing quantity to stressing high quality.

“That means as China continues to import agriculture products it will gradually tighten the quarantine and quality standards as well as strengthen supervision to eliminate foreign products of lower quality,” she said. 

The nation’s import strategy can be summarized in two words: balance and diversification. 

“That’s in terms of country of origin and commodities,” Xing said. “It will diversify trade partners and prioritize those with fewer political conflicts, which will also buy more time for China to repair trade relationships with key partners like the US and Canada.”

Global economy, markets 

China is a big question mark when it comes to the global economy, said Linda Nazareth, economist, futurist and senior fellow, economics and population change, at the Macdonald Laurier Institute. Global recession is a possibility, but it will be a different kind, she said. 

“Economic growth will be somewhat sluggish,” Nazareth said. “We’re beyond the drop of the pandemic and the bounce back. We’re probably looking at economic growth lower than what we got used to the decade before. That’s something to be prepared for.”

During the last global recession, China offset what was happening in the United States and elsewhere, she said. But with China only predicting 5% growth coming out of lockdown, it won’t do much to counteract a global slowdown. 

“If there’s something that would take us into a recession it would be China not coming back as strong as we would expect it to,” Nazareth said. 

Changing demographics, including an older population in the most developed nations, climate change, worker shortages and Industry 4.0 will impact the economy. 

“We have disruption after disruption,” she said. “Economic success will depend on how resilient the different industries are. There’s a lot of Band-Aid solutions being put in place in different parts of the economy right now post-pandemic. We’re just going to go back and forth before we get to some kind of normal.”

The ending stocks of major crops in Canada for 2022-23 are not much better than the drought year, said Chuck Penner, owner of LeftField Commodity Research. Total ending stocks in 2021-22 were 6 million tonnes, and by the end of this year ending stocks are expected to improve to 7.1 million tonnes. 

“It’s still an extremely tight supply situation in the aggregate,” he said, noting that there are some crops that are on the heavy side. “In the last couple of years, supply for all crops could be described as tight so when farmers were making decisions about what to plant, everything was a winner. This year that is different.”

In Canada, wheat stocks are 40% below the five-year average and canola is down 60%.

“That means we can’t afford to have any kind of production glitches this year; there’s really not much cushion,” Penner said. “Things could get really exciting again if there’s any kind of weather problems at all.”

On the other hand, there’s a large cushion in oats, with ending stocks over double the five-year average, and flax stocks 204% higher. 

Looking into the 2023-24 crop year, Penner said winter wheat production is expected to be up 32% from last year and spring wheat is anticipated to increase 5% while durum might drop some. Corn will be roughly steady, maybe up some, while oats, barley and rye are expected to drop. 

Based on average yields, wheat and barley supplies would be steady while durum, canola and pulse supplies would be tight, and therefore price supportive. Oats could slip back to average, while flax and mustard seed are going to look heavy, he said. 

“So, it’s a real mixed bag,” Penner said. “The last couple of years, they’ve all been winners. This year, there are some winners and some losers.”

Trade patterns

But there are structural market shifts that mean changes in trade relationships and global production patterns, he said. Notably, Canada’s dominance in some crops is being challenged and its role in price determination has been shrinking for many crops. 

“We have to be cognizant of that, we can’t bury our head,” Penner said. “We can’t say if Canadian production is this, then price is this. That ability to do that kind of forecast or prediction is in the past. We need to keep our eyes open to what’s going on beyond our border. We have to look at trade data, look at production data, talk to people in these other places and find out what’s happening and how that can affect our markets.”

For example, Australia had record canola production this year and is seeing production overall trend higher. The same is true of US canola and Black Sea rapeseed. Canada, however, did not see a record crop and it’s not trending higher, he said. 

“Global canola exports have been trending higher, but the Canadian share has been dropping,” Penner said. “Whether that’s good or bad is another question. At the same time, the domestic industry is ramping up, so we have less canola to move out.”

In the medium term, Canadian farmers are running up against rotation constraints that other countries don’t necessarily have. China is diversifying its product origins for crops that Canada has relied on that market for, such as barley, peas and flax.

“Once other countries adopt a crop, they tend to stick with it,” Penner said. “Once they’ve established those markets and trade routes develop, relationships solidify, you can’t just flip those off and hope they go away.” 

Looking longer term, Penner said there’s a change in the population growth paradigm. Predictions used to call for ongoing growth in global population but now China’s population is falling along with 35 other countries.