China has surprised world oilseed analysts by setting a torrid pace of canola and rapeseed imports that should beat the record-breaking gallop set last year.
So with all this demand, why aren’t canola prices rising?
Analysts reply that world supply of canola, rapeseed and other oilseeds is up even more than demand. Canada’s crop is 13 percent bigger than last year, the European Union is up 18 percent and Australia is up a whopping 32 percent.
There are a lot of hungry competitors hoping for China’s business.
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“There is talk that China’s canola-rapeseed imports could touch four million tonnes, but a lot of that is presently coming from Europe and Australia,” said Derek Beatty of PCTS Inc. in Regina.
“That export demand is actually the only thing that is supporting this market.”
Other analysts agreed.
“Rather than give us a rally, this Chinese demand has probably kept us from an all-out price disaster,” said Dave Reimann of Benson Quinn-GMS Inc.
Adding to the weight of record canola and rapeseed crops are a record soybean crop in the United States and lots of Malaysian palm oil. So this unexpected demand from China is welcome.
“We assumed last year they imported as much as they did because of their own crop failure,” said Reimann.
“This year their crop came back and we went on the assumption that their imports would drop off. But they have at least held steady if not grown.”
China is crushing oilseeds “at massive rates” to meet its voracious demand for vegetable oil, he said.
It doesn’t need large amounts of meal and so it is favoring high oil content seed such as canola over lower oil soybean.
“We are stealing business away from the bean producers,” he said.
This demand shift does not increase overall oilseed demand and the weakness in soybeans helps prevent a rise in canola prices.
Reimann also said China wants seed, not refined oil. It wants to support its domestic crushing industry. Last year the government cracked down on what it said was a big business of smuggling vegetable oil into China. It also maintains restrictions on the amount of oil that can be legitimately imported.
In doing so, it maintains the highest domestic vegetable oil price in the world for the benefit of its seed crushers.
