When the Chinese start consuming canola, they can use a lot.
That’s been good for canola prices over the years, but it hasn’t been steady demand. And usually the Chinese start buying canola only when it is cheaper than other vegetable oils. The Chinese are discount shoppers.
But one Canadian expert on China thinks that could change within the next five years. Not only does Ed Tyrchniewicz think the Chinese will buy canola at higher prices, but they will become far more dependable.
“I think they’re going to be a more regular customer, not just filling gaps,” said Tyrchniewicz, acting director of the University of Manitoba’s transport institute and a member of a Chinese government-appointed panel studying China’s agriculture industry.
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“I would predict that within five years China is going to be (regularly) buying canola, but they’ll be a lot more quality conscious.”
China has bought significant amounts of canola this year. But some years it has disappeared almost entirely from the canola market. Sometimes canola is too expensive compared to competing vegetable oils such as soybean, and sometimes China has decided to rely on its domestic production of vegetable oils and extensive stockpiles.
This is unlike Japan, which buys canola every year regardless of price. While the Chinese often give the canola market a sudden lift when they enter the market, the regular Japanese de-mand gives canola prices their backbone.
Canola industry promoters have worked to develop other dependable buyers, such as Mexico. But it is China that holds the most promise because of its huge population and massive economic expansion.
Tyrchniewicz said most Chinese are poor compared to Canadians, but the middle and upper classes developing in cities such as Beijing and Shanghai are beginning to want high-quality, western-style foods.
These classes are only a small percentage of the Chinese population, but with an overall population of more than one billion people, they are significant.
“It sure as heck isn’t a niche market with that number of people involved,” said Tyrchniewicz. “There is a huge quality-conscious market.”
This will be good for the canola market because it will mean a wider customer base and fewer sags in demand.
But this new demand will bring complications. China will no longer be the place to dump low-quality, low-price crops that other markets won’t take.
“You’re not going to get away with shipping your third rate stuff to China,” said Tyrchniewicz. “They’re not going to use it. They will want quality. We’d better adjust our attitudes. They won’t be a disposal market.”
The Canadian Wheat Board says it is already selling malting barley to China at premium prices. Soon canola sellers may also find Chinese buyers willing to pay higher prices for the crop.
But if they pay a high price, they will want a high quality product.
“It’ll evolve not just into a mass market but also into a quality market,” said Tyrchniewicz.
“That’s going to be the challenge for our producers.”
