WINNIPEG - One of Canada's largest grain processors has been blocked from exporting canola to China, in a time of growing diplomatic tensions between the two countries.
Richardson International Ltd. confirmed Tuesday that its permit to export product to China has been revoked.
China's action follows notices of non-compliance on some imports from Canada alleging they were contaminated with pests or bacteria, something the Canadian government refutes.
"I am very concerned by what we've heard has happened to Richardson. We do not believe there's any scientific basis for this," said Foreign Affairs Minister Chrystia Freeland in Montreal.
"We are working very, very hard with the Chinese government on this issue, I want to assure Richardson, and all the Canadian canola families who work with Richardson, that this is an utmost priority of our government."
The loss of the shipping permit comes as Ottawa moves to proceed with the extradition hearing of Huawei Technologies Co. Ltd. executive Meng Wanzhou, who has arrested at the request of the U.S., which wants to extradite her for fraud.
News of the blocked exports to China, the destination for about 40 per cent of Canada's canola exports, hurts the entire value chain of industries involved in the market, said the Canola Council of Canada.
"We are aware of challenges our exporters have faced shipping to China — these are concerning as they create instability and add costs," said spokeswoman Heidi Dancho by email.
She said that while diplomatic frictions are concerning, there is no clear evidence they are related to the current challenges.
Neil Townsend, senior market analyst at FarmLink, however, said he thinks there's a definite link to the Huawei case.
"There's no doubt China's mad at us," he said.
China's move hits a vital crop to Western Canada, and comes after canola prices have already been hit by China's retaliatory tariffs on U.S. agricultural exports.
The industry should be concerned because if China cuts back on buying it would hit prices further, said Townsend.
"With China kind of saying — because they're mad about the Huawei thing — they're basically saying like oh we're not going to buy any more. So now there's going to be more canola left over at the end of the year, which is going to hurt prices for the remainder of this year, and into the next growing season and year."
He said he suspects Richardson was targeted since it's the largest exporter that is fully Canadian owned. Several other majors in agricultural exports are subsidiaries of global conglomerates, though Parrish and Heimbecker and Paterson Grain, neither of which replied for a request for comment, are also Canadian owned.
The setback for the Chinese market comes after Canadian farmers already lost out on Saudi Arabia's recent grain buy, also because of political differences with Canada, pointed out Townsend.
"Now we've got two potentially large markets for things that we grow quite successfully in Canada, essentially angry at us."
The permit revocation, first reported by Reuters, comes as Beijing has warned of serious consequences if Meng is not released. A March 4 report from Chinese state media accused former Canadian diplomat Michael Kovrig and entrepreneur Michael Spavor — both of whom were detained by Chinese authorities shortly after Meng's arrest — of trying to steal state secrets from the People's Republic.
Minister of Agriculture Marie-Claude Bibeau said in a statement that the government is closely monitoring the situation and any potential impact on Canada's agricultural trading relationship with China.
She said the Canadian Food Inspection Agency conducted further investigations after China issued notices of non-compliance on canola seed imports, including nine since January, and said the agency confirmed they have not identified any pests or bacteria of concern.
— With a file from Morgan Lowrie in Montreal