Flood in British Columbia Could Affect Canadian Grain Exports

Soybean

Published Nov 20, 2021

Floods and landslides during the past few days in Canada have resulted in the cutting off of all rail access to the Port of Vancouver, Canada's largest port. This could have a severe impact on the country's trade, as the port is effectively shut down following the recent floods, impeding shipments of the country’s leading exports, such as wheat, canola, soy, and barley. November is also one of the busiest times of the year for wheat exports, and the floods have caused wheat shipments from Canada, the world's third-largest wheat supplier, to cease. This situation could result in significant revenue loss for the country and impact global wheat supplies in the coming weeks.

Two days of torrential rain ripped through British Columbia, causing major flooding and shutting rail routes managed by Canadian Pacific Rail and Canadian National Railway, the country's largest rail companies. The port of Vancouver moves USD 605 million worth of cargo daily. In the US, Washington state, which is south of British Columbia, suffered a downpour of rains which led to power outages and the evacuation of 150K households. The US National Weather Service has issued a flash flood warning in the state. Certain areas in British Columbia received 20cm of rain on November 14, the usual monthly rainfall. The landslides and floods are the latest environmental issue impacting British Columbia, following wildfires that scorched an entire town in the Canadian province six months ago as temperatures soared during a record-breaking heatwave, raising new concerns about climate change. The port of Vancouver is Canada’s largest port, facilitating trade worth USD 240 billion, equating to USD 1 of every USD 3 of the country’s trade outside North America. The port has also played a significant role in boosting trade between Canada and Asia. In 2020, Canada’s trade with China rose by 18% at the port of Vancouver, despite the effects of COVID-19, with trade between Japan and South Korea showing significant improvement.

Canada’s wheat exports set to suffer

Canada’s leading agricultural exports, such as wheat, canola, soy, and barley, could be impeded by the effects of the floods. During the first half of the year, grain volumes through the port reached record levels, with wheat exports rising by 23% and barley shipments increasing by 151%. November is also one of the busiest times of the year for wheat exports, and the floods have caused wheat shipments from Canada, the world’s third-leading wheat supplier, to cease. Canada was the leading supplier of wheat to China in 2020/21, shipping 3.5 million tonnes of the 10.6 million tonnes that China imported. According to the USDA, in 2021/22, China is forecast to purchase 10 million tonnes of wheat.

Competitors will also look to capitalize on the port of Vancouver’s closure. Ukraine is a significant rival to Canada in the Asian market. Ukraine exports usually decrease in December, allowing for Canada to capitalize. However, due to the floods, Canada will not remain competitive during this period until the railway lines are repaired. Ukraine also harvested a 33 million tonne bumper crop this season, which will make the country’s export season push well into 2022. The closure of the port of Vancouver is expected to result in significant revenue loss for Canada and could impact global wheat supplies in the coming weeks.

Grain exporters seek port alternatives

Canadian grain exporters have sought to divert shipments away from the Port of Vancouver until service is restored. Alternatives remain limited to British Columbia’s northern port of Prince Rupert, the US Pacific Northwest, and eastern Canada. However, the Prince Rupert grain terminal is overloaded with exports, restricting its capacity to handle more volumes. Buyers can also charge penalties for shipments that arrive late, raising the urgency to find alternatives

(Source: The Western Producer)

Railway reconstruction could take weeks

According to Parrish & Heimbecker, a Canadian grain handling firm, and other analysts, estimate that progress on the reconstruction of the railways could take weeks. The impact of the floods also raised the possibility of price inflation coming into the holiday season. According to the Port of Vancouver, vessels could anchor longer as they await delayed cargo, leading to exporters paying demurrage for the delay. Delays could last over a month as the backlog of shipments continues to pile up. January canola futures increased by USD 2.90 to USD 1,015.80 per tonne, as flooding and landslides halted the transportation of commodities to the port of Vancouver.