WINNIPEG (Reuters) – Canada is shipping a near-record amount of canola oil to China, which analysts say shows an upside to Chinese barriers against canola seed.
The country exported 225,082 tonnes of canola oil to China between August 2009 and February 2010, the first seven months of its current crop year.
That’s up 57 percent from the same period a year earlier and puts it on a pace to just miss a record 395,000 tonnes shipped a year earlier, according to the most recent figures from Statistics Canada.
Read Also
University of Saskatchewan experts helping ‘herders’ in Mongolia
The Canadian government and the University of Saskatchewan are part of a $10 million project trying to help Mongolian farmers modernize their practices.
The increase in canola oil shipping roughly coincides with China’s restrictions against Canadian and Australian canola seed with blackleg disease and reflects state-owned Sinograin’s decision in December to boost Canadian oil imports to 350,000 tonnes from 150,000 tonnes in 2010.
With less canola seed available for Chinese crushers, China is importing more oil to keep up with demand, some of which comes from salad or cooking oil branded as canola-rapeseed products, said Don Roberts, analyst at Canolainsight.com.
“They want canola oil, period,” he said. “You have to supply that.”
Canada is the world’s biggest exporter of canola, and China is its No. 2 oil market this year after the United States.
Overall, Canadian canola oil exports are up 6.5 percent to more than 883,000 tonnes from August to February.
Higher demand for canola oil has boosted crush margins and underpinned ICE Canada canola futures, said Keith Ferley, a commodity trader with RBC Dominion Securities in Winnipeg.
On the surface, higher canola oil exports to China seem unlikely in light of the perceived reasons for China’s trade dispute with Argentina, which has brought massive Chinese purchases of Argentine soy oil to a virtual standstill. The dispute involves dumping of Chinese goods, but some see China’s record edible oil stockpiles and struggling oilseed processors as its real motive for curbing soy oil imports.
It’s not as simple to halt deliveries of canola oil because canola/rapeseed oil is historically preferred in parts of China, Roberts said. Canola oil volumes are also small compared to soy oil trade, he said.
The higher canola oil volumes may last only as long as China continues its restrictions against canola seed and as it moves toward refreshing its edible oil supplies, said Charlie Sernatinger, analyst at Fortis Clearing Americas in Chicago.
“By the time we’re done with the summer, China will have started this rotation of the old stocks and they’ll start their regular replenishment,” he said.
That means its oil imports will likely return to normal levels, he added.
However, Roberts said expanded canola crushing capacity in Canada, which is forcing more oil offshore, may extend the trend of higher canola oil shipping to China.
