Viterra’s joint venture to build a $20 million US canola crushing plant in China might seem like it’s coming at an odd time.
The investment comes just as the future of Canadian canola exports to China are in doubt because of Chinese blackleg restrictions.
“The whole situation with China is still very uncertain as to continued canola exports from Canada,” said Dave Hickling of the Canola Council of Canada.
However, Viterra chief executive office Mayo Schmidt said he’s optimistic that issue will be resolved.
Read Also
American sugar protectionism creates sweet madness
The 1985 farm bill started a series of protectionist measures, such as domestic marketing allotments, import quotas and hightariffs on imports exceeding the quotas.
“I am confident that work currently underway between our respective governments and the industry will help ensure Canadian canola seed exports remain strong into China in the future,” he said in a news release.
The company announced last week that it has entered into a joint venture with a Chinese company to build a canola crushing plant in that country. The facility will be built at the port of Fangchenggang in the southern province of Guangxi.
The new plant will not be subject to blackleg restrictions because little canola is produced in the area.
One market analyst quoted by Reuters News Agency said that could be crucial to the new venture.
“Strategically, they’re trying to set themselves up so if this continues, it won’t hinder them and may give them an advantage,” said Brian Wittal of Pro Com Marketing in Calgary.
However, others say it is a move by Viterra to become established in China for the long term.
Schmidt said the joint venture fits well with Viterra’s overall strategy to expand its processing into key end-use markets such as China, where the company has well established sales and marketing relationships and where demand for food ingredients is expected to continue to grow.
Viterra will hold a 49 percent stake in the plant, which is expected to crush 680,000 tonnes of canola annually.
The majority owner with a 51 percent interest in the new facility will be Guangxi Beibe Gulf International Port Group, a state-owned company that operates three Guangxi ports.
Construction is expected to begin in May and be completed in about 18 months.
The joint venture will be called Fangchenggang Maple Grain and Oil Industrial Co. Ltd.
The ports handle more than $5.5 billion of trade annually.
