A shift in China’s rapeseed subsidy should eventually result in increased demand for Canadian canola, say industry officials.
China has eliminated its national floor price for the crop and is leaving it up to the provinces to come up with individual subsidy programs.
The U.S. Department of Agriculture reports that four of the nine rapeseed-growing provinces have announced their subsidy program.
Jiangsu and Hubei have a policy that amounts to about US$30 per acre, which is less than what was previously reported. Anhui and Sichuan have also released details but the USDA said it was difficult to quantify the per acre subsidy in those provinces.
The USDA report said industry sources widely believe the rapeseed farmer’s gross income of about $600 per ton in 2015-16 is significantly lower than the floor price of $823 per ton the previous year.
Patti Miller, president of the Canola Council of Canada, said the policy shift could have implications for China’s rapeseed acres.
“The provincial subsidy incentives are less than when the national government had a floor price in place,” she said. “Simple economics would tell you if they are getting less that would result in reduced production.”
Tracey Shelton, spokesperson for Richardson International, said some rapeseed growing provinces might have no subsidy.
“If they are removing the support policy then certainly we think that would help Canada in the long-run in terms of pushing up demand and having increased need for canola,” she said.
Richardson is noticing an uptick in Chinese demand for canola in September.
“There has definitely been an increase in calls and interest,” she said.
“It could be a seasonal thing or it could be the start of this impact.”
One canola trader thinks the policy change could result in a 35 percent cut in China’s rapeseed acres in November when the next crop is planted.
Miller doubts the reduction will be that large because rapeseed is a double crop in China that is followed by rice.
“They have to have something to plant there, so that might buffer the effect of the lower prices somewhat,” she said.
Dale Thorenson, assistant director of the U.S. Canola Association, agreed with that sentiment.
“The question would be, what would they plant instead? I mean, it has to be planted to something.”
But Thorenson believes there will be some acreage reduction be-cause farmers are getting less money for growing the crop.
Thorenson said that should eventually result in increased canola imports but the impact will be delayed by China’s huge stockpile of rapeseed oil.
The International Grains Council estimates China has six million tonnes of the oil in its strategic reserves, which has become costly to maintain. That is the main reason China is changing its subsidy program.
“It’s a needed reaction to an oversupply,” said Thorenson.
Miller pointed out that the quality of Canada’s canola oil is superior to China’s rapeseed oil, so they are different commodities in many respects.
She believes Chinese demand for Canadian canola will remain strong regardless of what happens to the rapeseed subsidy.
“Just from the growth in the middle income, interest in health, all of those basics that have driven canola demand over the years.”