(Bloomberg) -- Canada’s largest canola exporter signaled that China’s decision to restrict its shipments may be linked to a growing diplomatic row with China over the arrest of a Huawei Technologies Co. executive.
Richardson International said it was informed by the Canadian government on March 1 that its Chinese canola import license had been revoked, raising concerns from other exporters that it may face similar restrictions. Canada is the world’s No. 1 producer of canola, and China accounts for about 40 percent of its exports.
“We’ve never had our licenses suspended by China or by any other countries,” said Jean-Marc Ruest, senior vice president, corporate affairs and general counsel at Richardson International, in a phone interview Wednesday. “We’re hard pressed to see what it could be other than a wider issue between Canada and China."
The canola spat threatens to add to tensions between the two countries following the arrest of Meng Wanzhou on Dec. 1 in Vancouver at the request of U.S. authorities seeking to extradite her. China responded nine days later by detaining two Canadians and giving them limited consular access ever since.
At stake is a C$3.6 billion ($2.7 billion) Chinese market for Canadian producers of canola, whose seeds are crushed for oil used in everything from salad dressing to deep-frying. Canola is also used as livestock feed.
Canadian Foreign Minister Chrystia Freeland, whose father grows canola on a farm in Alberta, told producers at an industry conference in Montreal that the government is dedicated to dealing with this issue.
“It’s really important for us to gather as much information as we can before drawing conclusions,” Freeland told reporters. “We have to just be united as a country and really work through this."
For months, Richardson had been working with the government after China had made a complaint that its canola shipments were non-compliant and that they had prohibited pests in them, Ruest said. Richardson, based in Winnipeg, Manitoba, is so far the only producer to have their license revoked, he said.
He suspects Richardson has become a pawn in strained relations between China and Canada that started after Canadian authorities arrested Meng while on a stopover for a flight to Mexico.
“It was an unfounded issue,” he said. “So we were surprised and obviously very disappointed with the decision to suspend our license.”
China’s Foreign Ministry defended the restrictions, calling them “well founded.” Chinese customs have noted recent inspection and quarantine problems with Canadian canola, spokesman Lu Kang said at a briefing in Beijing.
The Canadian government has said Canadian food inspectors haven’t identified any pests or bacteria of concern. If the claim is true and it’s an issue of non-compliance, Ruest said they should be able to resolve it fast.
If it was a wider issue “then it becomes much more complicated to resolve and that’s something that ultimately is then really out of our hands," he said.
Grain companies are currently gathered in Montreal for the annual Canola Council of Canada convention. Richardson isn’t a member but the council is still paying close attention to the case as it can impact the whole industry.
“We’re concerned about how the quality reputation of our canola is internationally and so we need to deal with this issue as quickly as we can," said Jim Everson, president of the council told reporters during the conference.
In Saskatchewan, farmers are paying close attention. Spring seeding is nearing and if the issue drags on, fewer canola acres may be planted. Saskatchewan farmers seeded 12.4 million acres of canola last year, which accounted for 54 percent of Canada’s total acreage, according to government data.
"For right now lots of farmers are hoping the industry works with the government and our big customer in China and gets this settled" said Todd Lewis, president of the Agricultural Producers Association of Saskatchewan, in a phone interview.
Canola fell for the eighth time in nine days in New York to C$455.30 a metric ton, after settling Tuesday at the lowest level since August 2016.
--With assistance from Peter Martin.
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