The Chinese government says if Canada can’t meet the proposed one percent dockage, it can buy elsewhere
China’s proposed new canola dockage policy would decimate Canada’s export program, create a backlog of the oilseed on farms and widen basis levels, say industry officials.
As of press time it was unclear whether there would be a resolution to the trade dispute prior to China’s Sept. 1 deadline for implementing its new policy requiring less than one percent dockage in all canola shipments.
The Canadian Grain Commission’s definition of a commercially clean shipment is a maximum of 2.5 percent dockage, but buyers and sellers can negotiate whatever amount they agree upon.
Read Also
First annual Ag in Motion Junior Cattle Show kicks off with a bang
Ag in Motion 2025 had its first annual junior cattle show on July 15. The show hosted more than 20…
The average in shipments sent to China is about two percent or double what is being proposed.
If the policy is implemented it would seriously disrupt but not eliminate Canadian exports to China.
Glen Pownell, managing director of Peter Cremer Canada, estimates it would cut seed exports in half to about two million tonnes per year to Canada’s top customer.
“You’re going to have significantly reduced exports based on that spec,” he said.
He believes the other two million tonnes would end up in carryout because there are no markets salivating for more canola.
“There’s only so many canola crushers in the world. We don’t have a lot of idle capacity waiting to take on the opportunity, that’s for sure,” said Pownell.
That means growers could expect basis levels to be much wider than normal as supplies build.
“It’s going to back up on the farm, not in the export corridors,” he said.
Brian Innes, vice-president of government relations with the Canola Council of Canada, agreed that the new rules would result in burdensome canola stocks.
“Finding a home for four million tonnes or a significant portion of that would be very difficult in the short term,” he said.
Exporters may be able to make inroads in price-sensitive markets such as Pakistan, Bangladesh, the United Arab Emirates and the European Union.
“We could see increased seed exports to those destinations,” said Innes. “We could also see some increased crushing in Canada, although utilization rates have been at historic high levels, so there’s not a lot of opportunity to crush more seed in Canada.”
He remains optimistic that politicians will work out a permanent resolution to the dockage issue.
The dispute escalated last week when Canada’s trade minister Chrystia Freeland suggested there could be no improvement in bilateral relations with China until the canola dockage issue is resolved.
China’s ambassador to Canada, Luo Zhaohui, shot back that Canada has been unfair and inflexible regarding the dockage dispute. He told the Canadian Press that it didn’t want the dispute to become a “trouble issue” during Prime Minister Justin Trudeau’s visit to China, which was scheduled to start Aug. 30.
Zhaohui warned that China could look elsewhere for its canola.
“Frankly speaking, you see, China, we have a lot of choice,” he said. “We can buy it from this country, from that country.”
Innes said China would have a tough time sourcing four million tonnes from other suppliers, considering Canada is responsible for two-thirds of the global canola trade.
Canada supplied 99 percent of China’s canola seed imports and 79 percent of its canola oil imports through the first seven months of 2016.
China claims its dockage policy is being implemented to minimize the risk of blackleg disease infecting China’s rapeseed crops.
Former Canadian agriculture minister Gerry Ritz has said that China wants to restrict imports so that Chinese crushers purchase more domestically grown rapeseed.
However, canola imports are restricted to a select group of crushers located in ports in provinces where rapeseed is not produced so it would be costly to bring in Chinese rapeseed. Others believe the policy is being implemented to help the government auction off its stockpile of rapeseed oil.
According to a Reuters’ story, China was sitting on 5.8 million tonnes of oil as of December, 2015, which was amassed when China was still subsidizing production.
It has since stopped subsidizing protein crops and is aggressively getting rid of its stockpile of oil. The U.S. Department of Agriculture estimates it has sold off 2.28 million tonnes of its reserves since late 2015.
Innes said the war of words between Canadian and Chinese politicians indicates the dispute has escalated beyond the phase of bureaucrats seeking a scientific solution to the problem.
“What I think it shows is that we have used all of the options that we have available and now it’s time to engage at a different level,” he said.
He is pleased that the Canadian government is “fully supportive” of the canola industry and its $2 billion in annual trade with China and remained hopeful that a solution will be brokered during Trudeau’s visit despite Chinese officials saying they don’t want the issue on the agenda.
