China is considering decreasing its tariff on soybean and soybean oil imports, which would make it even tougher for Canadian canola to compete in that important market if it does not get the same treatment.
News surfaced late last week that China’s commerce ministry is seeking other ministry input on a plan to lower import duties on a range of foods. There were reports that soybean import taxes would be cut to one percent from three.
There was no mention in the stories about what would happen to canola duties, which are at nine percent.
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There have been conflicting reports on what may happen to tariffs on cooking oil.
A Reuters story suggested the Chinese are considering cutting the soybean oil tariff to five percent from nine, while leaving the palm oil tax unchanged at nine percent.
A Bloomberg story said China may cut import tariffs on soybean, palm and canola oil to five percent from nine.
Dave Hickling, vice-president of canola utilization with the Canola Council of Canada, has asked Canada’s embassy in China to provide clarification on the rumours, but hadn’t heard anything back as of Feb. 18.
“We’re obviously very curious what’s going on,” he said. “We would hate to see (tariff ) reductions in just soybeans or soybean oil without reductions in canola oil and canola seed.”
China dropped soybean tariffs to one percent in 2007, leaving other oilseed tariffs un-touched. The change was made to help keep food price inflation in check.
“The fact that they’ve done it in the past means that it’s very possible they’ll do it again.”
He believes World Trade Organization rules do not allow China to decrease soybean oil tariffs without providing the same relief for palm and canola oil imports.
Hickling said the council would welcome an across-the-board cut in oil tariffs but not if the canola seed tariff remains at nine percent.
“We don’t like to see any one commodity given favourable advantage over another,” he said.
The China National Grain and Oil Information Centre is forecasting 1.5 million tonnes of rapeseed/canola imports in 2010-11, which would be half of the volume bought in 2008-09.
Canada’s canola exports to China through the first five months of the 2010-11 campaign are 36 percent below the same period in the previous marketing year.
Meanwhile, canola oil exports to China have soared. Canada has shipped 470,500 tonnes in the first five months of 2010-11, which is already 72 percent of last year’s total volume.
The canola oil export number is at odds with a U.S. Department of Agriculture forecast calling for 600,000 tonnes of Chinese rapeseed/canola oil imports in 2010-11.
That seems low,” said Hickling. “That basically suggest from here on in we’re going to stop.”
Hickling said blackleg trade restrictions are the most obvious reason why canola seed exports to China are down while canola oil exports are up.
However, the five Chinese plants that are allowed to import Canadian canola are buying below their 2.1 million tonne combined annual capacity, suggesting something else is at work.
Hickling blames the high price of canola seed compared to oil prices, which the Chinese government have regulated by releasing its oil reserves into the marketplace.
The upshot of high canola seed prices and regulated oil prices is that Chinese crush margins are squeezed.
“That would be the main factor why we’re having a little bit of a slump.”
It doesn’t help that canola seed faces a much stiffer tariff than soybean seed, making rapeseed crushers less competitive than soybean crushers.
Fortunately, Pakistan, Japan, Mexico and the United Arab Emirates have picked up the slack. As a result, canola seed sales are slightly ahead of last year’s pace despite disappointing sales to China.
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