The world’s most populous country has developed a voracious appetite for Canadian canola.
And that will help boost total exports of the oilseed to at least 4.7 million tonnes this year, shattering the previous record of 3.9 million.
“What has happened in the last month or two is that China has entered the market in a much larger, totally unexpected way,” said Chris Beckman, oilseed market analyst for Agriculture Canada.
China began buying canola from Canada in a big way two years ago, importing about 1.2 million tonnes in each of the past two crop years.
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But this year’s total will dwarf that.
“It looks like 1.8 million or maybe two million tonnes is achievable,” Beckman said.
That would put China atop the list of Canadian canola customers alongside Japan, which traditionally buys 1.8 million tonnes annually.
China normally imports from Canada in the fall, then switches to Australian and European suppliers until its own crop comes on-stream in May.
It’s unclear exactly why that pattern has changed this year, but a number of factors may be at work: Australia has less canola to export; China may be expecting domestic production problems; it may be buying Canadian canola to blend with local oil to improve quality; or it may be looking to export oil to India.
The buying splurge has helped support canola prices in the face of an otherwise bearish world market.
It could also contribute to a severe tightening of canola stocks in the coming year, with some analysts saying inventories could shrink to 400,000 tonnes by July 2002, down from 1.1 million tonnes expected by this July.
“That’s almost a bare minimum number, said Charlie Pearson, market watcher for Alberta Agriculture.
It also reflects an expected 10 to 15 percent drop in canola acreage this spring. With stocks that low, Pearson said, something will have to give on the demand side.
As for this year, while the strong pace of exports and the weak Canadian dollar have contributed to a recent rally in canola prices, the demand won’t be enough to trigger a significant rise in prices.
“Unfortunately there is such a world glut of soy oil and palm oil that we see limited opportunities for canola prices to increase,” Beckman said, noting expectations of record American and South American soy crops.
Agriculture Canada is forecasting a 2000-2001 canola price for No. 1 Canada, in-store Vancouver in the range of $255-$285 a tonne, with prices dropping by $10-$15 a tonne in 2001-2002.
Pearson said farmers with canola to sell should be shopping for the best deal, adding that it’s clear from the basis levels that some companies want to buy canola and some don’t. He said the flat futures market, with nearby and distant prices the same, is a signal to price canola now.
