For the second year in a row, China is buying far more canola than anyone expected.
That’s good news for farmers, but bad news for the Canadian oilseed crushing industry.
“It looks like they’re trying to develop a crushing industry and from what we see they’re trying to rip a page out of the Japanese book,” said Bob Broska, president of the Canadian Oilseed Processors Association.
Broska said China is importing seed duty free or at low tariffs and is placing big tariffs on oil imports. Japan has built and protected its oilseed crushing industry this way for many years.
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By buying more than a million tonnes of canola seed, China is shrinking crush margins in Canada.
“It’s a huge, big concern for the industry.”
Senior Xcan grain trader Joe Toens said China is causing a basic shift in the crushing of oilseeds worldwide. It’s not a matter of high tariffs any more; China simply isn’t issuing licences for oil imports.
“This is distorting the whole picture and the crush industry here in Canada is suffering, the crush industry in Europe is suffering and I’m wondering whether the crushing industry in South America and the States will suffer again.”
Toens said the latest estimates show China will import 4.5 million tonnes of canola and rapeseed this crop year, compared to two million last year and only 300,000 tonnes two years ago.
Canada’s canola exports to China have gone from almost nothing to nearly 1.3 million tonnes last year. This year’s exports could equal or surpass that.
Crushing increases
Toens said China crushed 8.5 million tonnes of canola two years ago, 9.2 million last year and will likely exceed 13 million tonnes this year.
“It’s a clear shifting of the crushing capacity of the world,” said Toens.
While seed sales are rising, sales of canola oil to China have dropped from 71,200 tonnes in 1997-98 crop year to 45,600 tonnes in 1998-99.
Canola seed prices have been falling all year, but Chinese demand has slowed the decline. But its lack of vegetable oil imports has sped the fall in oil prices. Canadian oilseed crushers are caught in the middle with little or no profit margin.
Adding insult to injury, Broska said China bought Canadian canola seed last year, processed it and sold the canola meal back to markets on the west coast of North America.
“That’s just a sign of the economics of the crushing industry in China. There’s so much in it for them in a protected market that they can afford to put meal back into North America,” said Broska.
“So they spooked our seed market, kept us out of the oil market and then beat us at the competition for meal markets in North America. So our industry is very concerned about what is going on.”
