A Canadian grain company has reportedly agreed to ship one percent dockage canola to China while the Canadian government continues trying to convince the Chinese that one percent is unnecessary and unfeasible.
China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) notified the Canadian Food Inspection Agency Feb. 22 that it would be implementing a new policy requiring a maximum of one percent dockage in canola shipments.
That is well below today’s maximum of 2.5 percent. The average dockage level on a ship of canola heading to China is two percent.
China was originally going to implement the policy April 1, but Canadian officials convinced the Chinese to push implementation back to Sept. 1 while they searched for a negotiated solution.
China says lowering the allowable dockage limit will reduce the threat of blackleg disease entering the country.
It does not agree with Canadian research that concludes the threat of blackleg transmission in current levels of dockage is virtually non-existent.
The Canola Council of Canada has argued it would be impossible to meet China’s proposed one percent dockage rules on a consistent basis.
However, according to a grain industry official who requested anonymity, at least one company has already agreed to those terms.
“Canada sold a few cargoes of one percent dockage canola to China last week, and P&H (Parrish and Heimbecker) was the seller,” he said.
P&H was contacted and had no comment about its sales. The grain industry official said rumours of the sales are rampant in the Canadian grain trade and have been confirmed by two sources in China.
The deferred delivery sales are for two small shipments amounting to 35,000 tonnes of canola.
“If this is true, then there’s a crack in the armour in regards to the stance the Canadians were taking,” he said.
It bolsters China’s argument that one percent dockage is indeed possible.
Patti Miller, president of the Canola Council of Canada, acknowledged that some trade with China would still occur if the new policy was implemented, but it wouldn’t be anywhere near current volumes of four million tonnes a year.
China accounts for about 40 percent, or $2 billion worth, of Canada’s annual canola seed exports.
“The occasional vessel can obtain one percent, but we don’t believe it’s really feasible for the entire sector to operate at that level,” said Miller.
“If they impose that kind of restriction, we’d see a significant impact on farm incomes, you’d see a significant impact on profitability throughout the supply chain.”
The canola industry contends that forcing grain companies to clean canola down to one percent dockage would slow the grain handling system and reduce terminal capacity for all crops.
Canola seed exports to China have already slowed considerably because of uncertainty over the Sept. 1 deadline.
“Most exporters have not booked past September and so there has been, as I understand it, an increase in oil sales,” said Miller.
The grain industry official said cleaning to one percent is possible, but if the industry starts meeting those terms in shipments to China, it is only a matter of time before importers in Japan, Mexico, Pakistan and the European Union will demand similar treatment.
He said Chinese crush margins are “enormous,” which is why a Chinese importer was able to make a bid so lucrative for one percent dockage canola.
There was hope that Chinese and Canadian government officials would hash out an agreement on the dockage issue during a meeting in Beijing last week, but negotiators left the table without a deal.
“The discussions are continuing, but we left China with no commitment from the Chinese to change their one percent,” said Randy Dennis, chief grain inspector for Canada, who attended the Beijing round of discussions.
Miller remained optimistic a deal will be reached before Sept. 1.