Uncertainty about the future of Canadian canola sales to China is gripping producers and the industry following new demands by the Asian country. 

Starting Nov. 15, China will require shipments of Canadian canola be certified as blackleg-free before they will be accepted.

"Trying to certify it as being blackleg-free would be very, very difficult," says Rick White, general manager of the Canadian Canola Growers Association.

The Canadian Food Inspection Agency says it will not issue a certificate, since blackleg is a common plant disease of canola in Canada and there is no agreed testing method. Blackleg can result in significant yield loss in susceptible canola varieties. It’s caused by a fungus and commonly occurs in canola growing regions throughout the world including Canada and China.

"There are spores carried on the seed, but when the seed is crushed for oil through the processing of seed into oil, all those issues go away," White explains.

Industry officials have confirmed that all of Canada's canola exported to China goes for processing, which makes the new protocol seem unnecessary.

The Canola Council of Canada says the Chinese have indicated they have non-virulent strains of blackleg, while Canada and Australia have virulent strains that could impact their crops.

On Oct. 23, the CFIA held a conference call with the grain industry to outline the new export requirements and the steps being taken to change China’s mind. This week, a Canadian delegation of food safety and trade officials are in China to try to resolve the issue.

"CFIA immediately requested a minimum six-month extension to deal with this issue and to provide China with additional information," says the CCC in a statement.

China has turned into an important market for Canadian canola, importing 2.6 million tonnes of canola seed from Canada during the 2008-09 crop year, according to the CCC. That was about one-third of Canada's export program.

"We're hoping that common sense will prevail and scientific evidence will prevail in this case. Hopefully we'll avert any trade disruption to China," White says.

Canadian flax exports to Europe may be close to resuming.

Progress has been made on testing for genetically modified material in shipments.

On Oct. 19, representatives from the Canadian government made a presentation to the European Union's standing committee on the food chain and animal health. The presentation explained a new protocol that's been developed to sample, test and document the presence of a GM flax variety in shipments from Canada.

"It has been accepted that there are other tests, which are referred to as construct tests, which will be acceptable in determining whether the flax is positive or negative for a GMO event," explains Barry Hall, president of the Flax Council of Canada.

On Sept. 8, the European Commission issued an alert that a bulk shipment of Canadian flax contained genetically modified material. The shipment was ultimately found to have traces of a GM variety known as CDC Triffid. It was developed in the late 1990s but never approved for commercial production in Canada.

The new protocol that's being promoted is designed to satisfy the EU zero tolerance policy for unauthorized GMOs.

"This construct test needs to be able to pick out one seed in 10,000," Hall says, adding the test is sensitive enough to reach that standard. He's also confident Canadian flax shipments will be able to meet that requirement.

The EU committee discussed the protocol following the presentation by Canadian delegates. The committee is expected to make a decision soon on resumption of Canadian flax shipments.

Hall is anxious for a decision.

"The window of opportunity to ship out of Thunder Bay is closing and the Belgium crushers need flax and Canada is their only source," he says.

Canada's flax shipments to Europe move from Thunder Bay through the Great Lakes and out the St. Lawrence Seaway. However the seaway normally closes in December due to freezing, meaning the opportunity to export flax to Europe this year is quickly coming to an end.

The Flax Council of Canada says there's a lot of work to be done to determine how this new testing will be conducted in Canada and how companies can manage the new protocol to meet the rigorous European standards.

The Canadian government is pushing European Union countries to drop subsidies for agricultural products at talks aimed at reaching a bilateral free-trade agreement.

At the same time, European countries want Canada to get rid of its supply management systems for dairy, poultry and egg products, something Trade Minister Stockwell Day insists is not on the table.

"Our supply side sectors are not things that we negotiate," Day says in an interview with The Canadian Press. "We have established many bilateral and multilateral agreements with that understanding, and that's how we're proceeding on this one."

Some experts, however, say that kind of intransigence will make reaching a new trade deal with the Europeans virtually impossible.

Michael Hart, a research fellow at Carleton University's Centre for Trade Policy and Law, goes so far as to say the talks are nothing more than a political exercise and a waste of time and money.

"What's negotiable is not worthwhile, what's worthwhile is not negotiable," Hart says. "Canada is not going to give up supply management in a bilateral negotiation with the EU. Canada is not going to give up ownership restrictions on the cultural industries. And the EU is not going to unzip the common (EU) agricultural policy or adapt any of its regulations to accommodate Canada."

Canadian and EU officials completed their first week of formal trade talks last week, discussions which Day describes as tough but productive. Canada is hoping a deal can be reached within two years.

Hart's colleague at Carleton's Sprott School of Business, Ian Lee, agrees that the economic benefits of reaching a trade deal with the Europeans might be seen as trivial.

The trading relationship between Canada and the EU is currently worth about $40 billion. A new free-trade agreement could expand that amount, conservatively, by another $15 billion.

But such a deal could lay the political footings for trade talks with other countries -- particularly in Latin America and Asia -- and could even mark the underpinnings of a new North American trade agreement, should the United States choose to reopen NAFTA, Lee says.

"We should be trying because it sets a precedent," he says. "Whatever we negotiate then could become the foundation for subsequent negotiations with other countries."

One of the biggest hurdles in the way of an agreement is the EU's subsidies to its agricultural sector -- a highly charged issue that Day says distorts international trade.

As recently as last week, European agriculture producers held massive protests denouncing EU plans to limit agricultural subsidies over the next few years. European political leaders have said they, too, want to scrap the subsidies altogether.

It will be at least a few more weeks before Canada and Mexico will be able to push forward with their trade challenge over United States country of origin labelling for meat products.

On Oct. 23, the United States blocked the request for a World Trade Organization dispute settlement process to begin.

Earlier this month, the Canadian government announced it would be challenging the meat labelling restrictions through a WTO dispute settlement panel. Mexico followed by joining the case a few days later. As part of the process, the country being challenged can reject the first request for a panel; however, when the panel is requested a second time, it cannot be blocked again.

It’s expected the trade dispute will proceed at the next WTO dispute settlement body hearing on Nov. 19.

Canada's agriculture minister Gerry Ritz says the latest move by the U.S. was not unexpected.

"Our government has made it very clear to our American counterparts that we will not sit idly by as our producers are treated unfairly," Ritz says in an email to The Canadian Press.

COOL forces American packers, feedlots and processors to keep strict records of where the meat was raised so retailers can mark the packages with an appropriate label. This has forced many American meatpacking companies to stop or limit buying Canadian cattle due to the increased cost of keeping the animals and meat segregated. The Canadian Cattlemen’s Association estimates the cost to the beef industry so far is around $250 million.

The Canadian government originally challenged the rule in 2008. They pulled their WTO case off of the table in early 2009 when the Bush administration in the U.S. changed the guidelines to be less onerous. The trade challenge was revived in April 2009 after U.S. agriculture secretary Tom Vilsack issued a letter to the American meat industry asking them to voluntarily comply with stricter labelling guidelines specifying where the animal was born, raised and slaughtered.

In the WTO dispute settlement process, arguments could be finished in February, with an interim report delivered sometime in the spring and a final decision in early summer. 

Statistics Canada has released the latest figures on hog inventories on Canadian farms.

Population has declined 7.3 per cent between the third quarter of 2008 and the third quarter of 2009. Statistics Canada attributes the decline to low market prices, the restructuring of farms and farm closures.

As of Oct. 1, Canadian producers had 11.8 million hogs on their farms, down from 12.7 million on the same date last year. At the same time, the number of farms with hog operations declined from 8,500 to 7,700.

The number of sows reported on farms reached 1.3 million, down 4.4 per cent from Oct. 1, 2008. Statistics Canada quotes the hog industry as stating that the number of sows anticipated to farrow is expected to continue declining.

Hog producers exported about 1.6 million hogs during the third quarter of 2009, down 27.2 per cent from the same period last year. During the same period, domestic slaughter of hogs increased 5.9 per cent as slaughter capacity improved in some regions.

A mediated settlement between packinghouse workers and the newly-unified co-operative in British Columbia's Okanagan Valley this week will see a three-year wage freeze and more flexible shift scheduling.

It's all part of efforts to consolidate orchard industry operations as owners work to increase efficiency and gain an edge in the tightly competitive global fruit markets.

In the past two years, industry has been restructuring to create unity among co-op members, ensuring that quality is a prime focus so it can be used for marketing.

Merger of the four major packinghouses occurred last year and formed the Okanagan Tree Fruit Co-operative, representing about 1,000 orchards.

The co-op has continued consolidation, with closure of one packinghouse last year and another set for the end of this season.

"The problem is it's inefficient to have three plants operating at 30 per cent efficiency, with three sets of equipment to maintain," says Mohamed Doma, the co-operative's negotiator. "They need to be consolidated so one plant can operate at 90 per cent efficiency."

That means plants need to operate for a second shift in the day and on weekends -- particularly during harvest -- without paying a premium on top of the regular wage.

Doma says plants in Ontario and Washington State are British Columbia's largest competitors. In those locations, employees are paid $6 an hour less in every position, making it impossible for the co-op to compete without some cost relief.

Orchardists are going out of business, he points out. Employees must recognize that the industry had to be protected.

Many of the 500 unionized employees are seasonal workers. Doma says there are still some issues to resolve, but the binding report of a provincial mediator provides a basis for resolution of other matters.

Employees voted in favour of a strike in mid-July, but both sides later agreed to a mediator. The contract expired Aug. 31.

Alberta lamb producers want to get the good news out.

Lamb production is currently the most profitable livestock industry in the province. But production levels are only meeting about 50 per cent of the demand, forcing grocery stores and restaurants to import the shortfall.

The production deficit means there are good opportunities for existing producers to expand their operations or for new producers to consider entering the industry, says Margaret Cook, Alberta Lamb Producers (ALP) executive director. She notes demand has been forecasted to increase 40 per cent between 2004 and 2020.

As many cattle and hog producers are currently re-evaluating their futures, Cook believes it is a good time to tell them about the opportunities in the sheep industry. With that in mind, ALP launched an expansion campaign aimed at promoting industry growth across Alberta.

Cook stresses established producers should not view new producers as a threat, since there are plenty of opportunities for everyone. She says there is more risk in forcing consumers to buy imported lamb than in increasing local production levels.

“Many consumers want to buy local, but they can’t always do it,” she says.

The campaign, launched this week at the Alberta Sheep Symposium in Leduc, will extend over the next year.

It will include brochures, direct mail, advertising in the farm press and an industry video to support existing training material. Cook says ALP will also be attending major agriculture shows this winter and spring.

She's confident there will be strong interest from disillusioned cattle and hog producers, noting there were eight to 10 cattle producers at the symposium looking for information on converting their operations.

Alberta is the first to roll out its campaign, and Saskatchewan producers are looking at a similar promotion. Cook says production shortfalls are not limited to Alberta but are occurring across the country. For more information, check www.ablamb.ca.

The largest culled-cattle slaughter plant in Eastern Canada has been conditionally approved for a loan to construct a new processing facility next to its existing slaughter house in St-Cyrille-de-Wendover, Que.

The producer-owned Quebec beef packer Levinoff-Colbex is set to receive $9.6 million through the federal government under Agriculture and Agri-Food Canada’s Slaughter Improvement Program, part of Canada’s Economic Action Plan.

“It’s imperative that Quebec farmers and, indeed, farmers throughout Eastern Canada have access to slaughter facilities,” says Jean-Pierre Blackburn, minister of national revenue and minister of state (agriculture).

With 375 employees, Levinoff-Colbex is a key service to the bovine livestock sector in Eastern Canada, serving as the only significant cull-cow slaughter facility for producers in Ontario, Quebec and the Atlantic provinces. Levinoff-Colbex slaughters and processes 150,000 cull cattle per year.

The Canadian Cattle Identification Agency is studying the use of Radio Frequency Identification systems at auction markets.

The project will install, operate and test multiple commercially available RFID reader technologies in eight auction markets across Canada and collect data from three markets with pre-existing systems. At the conclusion, study results will outline implementation costs and benefits to both industry and government.

Auction facilities in Ontario, Manitoba, Saskatchewan and British Columbia will be studied.

CCIA states in a news release that traceability in the Canadian marketplace requires the capture and transfer of RFID tag data from cattle to the agency's database -- the Canadian Livestock Tracking System or CLTS -- through the use of electronic readers at each movement site. The technology and processes must meet the needs of auction markets by not impeding commerce or causing additional stress for the livestock.

Phase one of the research will evaluate the ability of existing technology to collect and disseminate RFID tag data to CLTS at a high level of accuracy and reliability. Further, the research will evaluate the impact on commerce both in speed and cost of implementation to support full traceability.

Results are expected in January.

The Canadian canola market was hit with a bombshell last week.

The Chinese government notified the Canadian Food Inspection Agency that it would no longer accept canola seed for import as of Nov. 15 without a certificate showing it is free of blackleg -- a disease that is no longer a major threat in Canada, but continues to be commonly found in canola seed.

Upon hearing the news, the negative response in the canola market was immediate. Futures fell and cash basis widened. With China representing a third of Canada’s canola export market last year -- 2.6 million tonnes -- and with a sizeable export program already on the books for this marketing year threatened, this is a very big deal for the canola industry.

The Canadian government reaction has been swift. Officials quickly dispatched to Beijing to meet with Chinese government representatives this week in an effort to work out a compromise which can hopefully maintain normal canola trade between the two countries.

"This is a very serious issue, and we are working with Chinese officials to resolve this issue for Canadian canola producers," says Agriculture Minister Gerry Ritz.

"We want to highlight that this is not a food safety issue, rather it is a trade and market access issue," says CFIA spokesperson Tim O'Connor. "We're confident that Canadian farmers grow the best canola in the world and we'll continue to work on their behalf to resolve this situation."

Certification for canola loaded after Nov. 15 as blackleg-free is an impossible requirement from any supplier, whether they are Canadian, Australia or European. So one is left to wonder, what are the Chinese up to?

There is still a lot of speculation about why the Chinese have decided to impose blackleg restrictions. Many deal with economic issues, but Canola Council of Canada spokesperson Debbie Boulanger says that's not the official reason provided by China.

"The Chinese have indicated to government officials they have non-virulent strains of blackleg, while Canada has virulent strains, which could impact their rapeseed crops. That's the reason we've been told," Boulanger says.

Boulanger says they're not sure why the Chinese are concerned about blackleg.

"There should be no real risk of blackleg to Chinese production because all we ship from Canada to China is seed. That seed is strictly used for processing, not planting. It seems like an odd position that they're taking right now."

Boulanger says the council is gathering information that will satisfy Chinese officials that Canada's strain of blackleg will not get into their system.

Canadian officials in China right now are looking for at least a temporary solution. The CFIA will request a minimum six month extension to deal with the issue and provide China with additional information.

Given the market uncertainty, the canola outlook tarot cards have now been tossed into the air.

Without China taking two million tonnes or more of Canadian canola this year, there's a giant, gapping hole in Canada’s demand matrix that cannot be easily filled by another buyer. Equally, Chinese canola users have few to no other alternative options for canola supply under these import restrictions.

It seems reasonable to assume a compromise of sorts will be worked out. Business will again resume under some form of negotiated settlement. The question is when? And the situation is more uncertain given the fall season is traditionally the heaviest shipping period of the canola marketing year with a large amount of tonnage and business already on the books.

Does this get resolved in days, weeks or months? No one can answer that right now.

But China accounts now for about one-third of Canadian canola exports. And a delay of weeks creates a real demand hole logistically.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit www.pfcanada.com to find out more about his services.