China is considering increasing its tariff on soybeans, a move that would make canola more competitive in the world’s largest oilseed market.
“It is being discussed between different departments in government,” said Dave Hickling, vice-president of canola utilization at the Canola Council of Canada.
Rumours surfaced last week that China was contemplating an increase to the soybean import tariff to nine percent from three percent, which would put it on par with what canola seed and oil faces.
International soybean prices have been halved in recent months, which put a financial squeeze on some of China’s 800 million farmers. That is a disturbing turn of events for a government that has made it a priority to raise rural incomes.
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Hickling’s contact at the Canadian embassy in China confirmed a tariff rate hike is being discussed to artificially inflate domestic soybean values.
“It wasn’t totally clear as to who was driving the agenda but it was far from being a done deal,” said Hickling.
“The feel I got was it was a bit of a long shot that this would happen.”
What the council would really like to see is removal of all oilseed tariffs into China, but parity with soybean is its fallback position.
Canola has a tough time competing with soybeans in China, given the six percent difference in tariff rates between the two commodities. But it is still one of the top destinations for Canada’s big money crop.
In 2007-08, Canada shipped 659,300 tonnes of canola seed and 249,000 tonnes of canola oil to China.
Hickling said those volumes could easily double if the rumours became reality.
“If tariffs were on parity then it would be closer to two million tonnes (of seed and oil exports) and boy, that would be great,” he said.
Canadian farmers harvested 10.9 million tonnes of canola this fall and will need all the help they can get marketing the record crop into a slumping global economy.
The Food and Agriculture Organization of the United Nations predicts global rapeseed trade will climb in 2008-09 but Canada’s share will shrink.
“Ukraine should account for most of the rapeseed increase. Thanks to competitive pricing, the country is likely to raise its market share at the expense of Canada, who could face a cut in exports for the first time in eight years,” said the agency in its November 2008 food outlook.
