I might be presumptuous, but I think China’s capacity for canola imports is better than the pessimistic outlook issued by a major Chinese grain company executive.
Felix Muller, head of global soft seeds for COFCO International, last week said China’s imports will likely be capped at about 10 percent above the current level.
We’ve reported on other developments that could dispute Muller’s outlook, but his concern about canola’s meal quality is valid.
In May this year, we reported that two large soybean crush facilities were being converted to canola processing and a third could follow suit.
Jarrett Beatty, trading manager with Parrish and Heimbecker, believes the two new plants will boost Chinese demand to five million tonnes in 2017-18 from an estimated four million tonnes in 2016-17.
That four million last crop year amounted to 36 percent of all Canadian canola exports.
It is too early in the crop year to determine if China will indeed increase imports this year. Statistics Canada and the Canadian Grain Commission have country destination data on exports for only the first two months of the crop year.
However, total export data is available to Nov. 12 and it shows canola exports are at a record pace.
Given this news, Muller’s contention that China imports can’t climb beyond about 4.4 million tonnes seems pessimistic.
In addition to increasing canola crush capacity, China’s imports will also be affected by how much it grows domestically.
The country eliminated its rapeseed subsidies in 2015-16, leading to a planted area cut of three percent.
The previous support program led to the government building up large stocks of rapeseed oil. When it stopped the supports, it also started selling off the oil in government auctions and has now used up much of the surplus.
In Canada there is lots of speculation that China’s import restrictions last year over blackleg levels were largely a non-tariff restriction to make it easier for China to sell the government-owned rapeseed oil backlog.
The government is now changing its corn support program, dropping production subsidies and developing an ethanol program to use up the huge corn stockpile.
It is also encouraging corn farmers to switch to soybean seeding to partly offset the rapid rise of soybean imports, but it is not expected to encourage rapeseed seeding.
So rapeseed area in China might continue to fall, and imports might fill the gap.
Nevertheless, Muller’s warning about canola meal shortcomings has credence.
The industry in Canada is well aware of canola’s meal deficiencies of high fibre, low protein and other negative attributes.
It is prized in dairy rations, but not in hog or poultry diets.
The Canola Council of Canada promotes in China research that shows canola meal in dairy rations raises milk production. Also canola meal inclusion rates in Chinese pig rations could be doubled to 30 percent without drawbacks.
However, it is also clear that breeding seed varieties with more attractive meal qualities would be a benefit.
Dow AgroSciences’ ProPound brand of canola already has higher protein in its meal, making it better suited for hog and poultry rations than traditional canola meal.
To successfully market the seed from the canola council’s target of 26 million tonnes of production by 2025, the Canadian industry will have to make the meal a more attractive product.