#CBC: “Why boycotting Canadian wheat is likely to backfire for Saudi Arabia” #Toronto #Montreal #Calgary #Ottawa #Canada

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The sudden diplomatic dispute between Saudi Arabia and Canada took plenty of sudden twists and turns this week, however maybe none was extra head-scratching than the dominion’s risk to cease shopping for Canadian wheat.

Because they do not purchase a lot as it’s. And if something, they’re prone to want to purchase extra quickly.

On Wednesday, the nation’s official grain shopping for company, the Saudi Grains Organization (SAGO), knowledgeable grain merchants that it could not settle for shipments of Canadian wheat or barley after Canada criticized Saudi Arabia’s arrest of political activists.

Canada is a serious grain provider to the worldwide market, however Saudi Arabia is not a serious purchaser of Canada’s wheat. Data from the Canadian Grain Commission reveals the nation purchased 68,000 tonnes of Canadian wheat in 2017, roughly the identical as the yr earlier than. That’s a drop within the bucket in comparison with another international locations, like Indonesia with 1.5 million tonnes, and the U.S. with practically that a lot.

So far in 2018, Saudi Arabia hasn’t purchased any wheat from Canada.

As a desert nation Saudi Arabia imports tons of of billions of {dollars} price of meals yearly, so the plan — if it is a critical risk — would presumably be to supply grains elsewhere.

If that is the case, Riyadh is prone to run into an issue: different international locations do not have a lot to promote proper now.

The monetary disaster of 2008-09 brought about American farmers to plant much less wheat, and farmers elsewhere on the planet began planting extra to take benefit and gobble up market share.

That all got here to a halt this yr, nevertheless, as crop yields and complete acreage for wheat declined attributable to unfavourable rising situations nearly in every single place however North America.

Europe is on observe to supply simply 19.eight million tonnes of wheat this yr, the bottom degree since 2012. Germany is generally a wheat exporter, however has resorted to importing 400,000 tonnes of wheat to fill its personal wants.

It’s the same story elsewhere. “Dry conditions for seeding next year’s winter wheat crop extend from the southwest [Europe] Plains to France, though Ukraine and Russia are starting to trend wetter,” Bryce Knorr, a senior grain market analyst with Farm Futures, mentioned in a latest be aware. “Now, a brewing El Nino warming of the equatorial Pacific threatens to slash Australian production by a third.”

Wheat costs up

Not surprisingly, that is pushing up wheat costs. Canada and the U.S. are two of the world’s largest producers of wheat, and farmers on either side of the border are seeing rising costs for his or her bumper crop.

The value of wheat within the agricultural buying and selling hub of Chicago has risen by greater than 20 per cent up to now month, and a bushel was altering palms for $5.78 US on Friday.

Analyst Dan Flynn, with the Price Futures Group in that metropolis, says costs abroad, the place the Saudis would presumably be shopping for their grains, are even larger. “The market tone remains bullish overall as world crops are still in trouble,” Flynn mentioned. Wheat markets may get much more costly in coming weeks, he mentioned, as a result of scarcity of manufacturing in a number of main wheat exporting international locations, corresponding to Australia, Ukraine and Russia.

Saudis depend on barley

The Saudis are large consumers of barley, too, however in that case they’ve been a serious buyer for Canada’s product — the second-biggest on the planet final yr, with 132,000 tonnes. That’s properly behind China, however forward of even the United States. Much like with wheat, the Saudis have but to purchase any Canadian barley this yr.

Barley like the type proven right here is primarily used as animal feed, however can be an necessary ingredient in beer. (Kate MacNamara/CBC)

Ordinarily, being a big buyer would give a rustic extra leverage, however that is not the case for the Saudis this time round. That’s as a result of one of many main makes use of for barley is as an animal feed, and plenty of international locations merely choose to make use of totally different crops corresponding to corn, oats or sorghum to feed their herds when costs for barley get too excessive.

“But the Saudis don’t do that,” Winnipeg-based grain analyst Chuck Penner, of Left Field Commodity Research, says. “They just buy barley.”

That over-reliance on barley is prone to backfire on Riyadh, simply as it might in wheat, as a result of poor harvests have brought about the worth of barley to spike nearly as a lot.

“Our prices have actually just in the last month or so been rallying sharply, and that’s not going to change based on this news,” Penner notes, including that the spot value for barley has risen by about 10 per cent up to now few weeks.

Which is why his evaluation of the Saudi technique is blunt.

“I think the Saudis picked a bad time to cut off a supplier,” Penner says. “They really don’t have a whole lot of other options.”

Note: “Previously Published on: 2018-08-12 04:00:31, as ‘Why boycotting Canadian wheat is prone to backfire for Saudi Arabia’ on CBC RADIO-CANADA. Here is a supply hyperlink for the Article’s Image(s) and Content”.

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