The Cold Hard Truth of Losing “Face” with Xi Jinping  

The last week has been a bit of a slap in the face as cold air has inundated southwestern Ontario and we had wisps of snow wafting across farm country. In some parts of Ontario there is heavy snow and toward the Niagara region close to Buffalo it’s going to be a snow tsunami this weekend. I still have hopes of land leveling next week. It just so happens in my place in the deep southwest of Ontario I might get to do that.  Who knew, in late November your loyal scribe might still be farming. The arid summer followed by an arid fall continues in my part of the country.

Needless to say, the agricultural economic machine continues to grind worldwide. We learned today that Russia Ukraine and Turkey have agreed to extend the UN brokered arrangement of shipping grain out of Ukraine with the Russians getting a promise for shipping their own ammonia out through some Ukrainian ports. The bottom line is that we will continue to see grain movement out of Ukraine creating somewhat of a softening effect on our grain markets.  War is messy for sure, but it seems like the Russians want to sell their own wheat and fertilizer and enjoy some foreign exchange.  Who knows what will happen next in that war theatre.

On the other side of the world this week we got to see some unique interactions as the G20 met in Bali Indonesia.  I was actually encouraged by the meeting between President Biden and China’s president Xi Jinping.  Biden was in a strong position coming off a surprising midterm election result.  At the end of the day, Biden and Xi engaged in a long three-hour meeting, and Biden emerged talking about healthy competition with the Chinese. I wouldn’t say they were back slapping each other, but it was nice to see a western leader actually publicly saying that they could be successful with dealing with China.  Xi said similar things but of course it’s always hard to read where the Chinese leader is coming from.

Culture makes a difference. If you have ever traveled to Asia like I have many times you will know that there is a different view from there. China and India are dominant in the region because of their high populations and big economies. What might work in North America and Western Europe doesn’t always translate well into Asia and that is one reason that there is much distrust between China and the western world. Amid this distrust however, North American farmers have built up an almost insatiable anticipation of Chinese demand for their agricultural products.  It is certainly palpable in Canada, and I know it is in the United States as well.

Simply put, there is a huge not always healthy rivalry between China and the United States and by default China and the West. At the same time there is this huge economic relationship where both sides depend on each other in many ways. Of course, in plain sight are the political differences which are a vast gulf. We have democracy on one side and dictatorial autocracy on the other. This leads to disagreement on so many issues.

If you are China and you need to buy corn like they certainly do where are you going to buy it?  Yes, it is true that “cheap” is always a defining element when it comes to trading any agricultural commodity.  However, mix in a little bit of politics into the equation and “cheap” might become relative.  Recently, China has accelerated changing some of their phytosanitary barriers with Brazil so they can import more Brazilian corn. These requirements were relaxed earlier this year and the Brazilians need to demonstrate that none of the past listed are polluting their corn export shipments. After this, small exports will commence to China, followed by much more.  Yes, a commodity is a commodity as a commodity, but in China’s case Brazilian corn is a little bit better than American corn.

Some of you might say, but how bout Canadian corn and soybeans to China?  Unfortunately, our relationship with China has really been sour over the last few years considering the two Michaels and Meng Wanzhou.  It was on clear display at Bali when Xi Jinping gave a dressing down publicly for the TV cameras of Canadian Prime Minister Justin Trudeau.  Xi accused Trudeau of leaking what he thought was a private conversation to the press.  Trudeau rightfully defended himself, but Xi finished by saying, “we should have conversations in a respectful way, otherwise, the result can’t be predicted.”   He then turned and walked away, Ditto for Trudeau.

I thought our Canadian Prime Minister did well in that exchange, but unfortunately it doesn’t matter. Xi Jinping would never rebuke an American president publicly like that for domestic television.  It reminded me that the big countries always set the rules.  In North America, Canadians know that our American friends set the rules for us, constantly defining what they think free trade is. The dustup between Trudeau and Xi was an example of that on the global stage, with an ascendant China.  Canada to China is obviously expendable and by default so are our agricultural commodities like corn, soybeans and canola.

So, do geopolitics matter to Canadian farmers?  Oh boy.  Often, I think as Canadians we bask in this unreality that everybody likes us and by default our Canadian agricultural products are more amazing than everybody else’s.   Keep in mind that’s not the case.  Xi Jinping thinks that way.  It just so happens that he is the leader of one of the biggest agricultural commodity importers in the world.

It makes me think that there’s no reason to build a campfire and sing “Kumbaya, My Lord”.  Our agricultural world in 2022 has been geopolitically on fire.  Some would say maybe even Canadian farmers have benefited. However, we learned last week in the exchange between Trudeau and Xi the hard truth.  This world can be a hard place for Canada and Canadian agriculture.  Sometimes maintaining “face’ with our Chinese counterparts means everything.   Finding our way through will continue to challenge.