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Canada’s canola meal sales to China at five-year high

Winnipeg/Beijing | Reuters –– Canadian canola meal shipments to China have jumped to their highest level in five years, boosting profits of crush plants and firming prices as farmers slog through a difficult harvest.

Canada shipped 415,000 tonnes of canola meal to China from January through August, the most since 2011 and following zero shipments last year, according to Canadian Oilseed Processors Association (COPA). The shipments are worth $132.1 million.

Several Canadian plants were registered this year for trade by Chinese authorities, a process that took more than a year for some, said Chris Vervaet, executive director of COPA, whose members include Bunge and Cargill.

Canola, known for its vivid yellow flowers, is crushed mainly to produce vegetable oil, vying against oils made from palm and soybeans. Its protein-rich meal feeds animals including U.S. dairy cattle.

Stronger canola meal demand from China comes as Canadian crushers steadily expand capacity. Cargill opened last year a new Alberta plant, and Richardson International is expanding a facility in the province.

“Finding alternative markets to the U.S. is huge for our continued growth,” Vervaet said.

Strong meal demand lifts crusher profits, increasing the prices they are willing to pay farmers, many of whom have struggled to complete harvesting in snowy, autumn weather.

Canadian canola crush margins last week were more than double those of a year ago, ICE Futures Canada said.

China’s canola meal demand reflects a trade dispute through much of this year between Canada and China over canola seed. The dispute created additional demand for canola meal until it was resolved in September.

Beijing also announced in September anti-subsidy duties on imports of U.S. animal feed ingredient distillers’ dried grains (DDGs), which looks to build demand for canola meal if China’s stance against DDGs, a byproduct of corn-based ethanol, remains, said Lu Yun, an analyst with consultancy JCI in Shanghai.

Through August, the U.S. had exported 1.96 million tonnes of DDGs to China in 2016, worth US$402.5 million, according to the U.S. Department of Agriculture.

The Canadian canola dispute temporarily reduced China’s imports of seed for domestic crushing, leaving Chinese meal buyers to import the feed ingredient instead.

Canadian canola meal sales to China look brisk through next June, said a U.S. canola broker, who was not authorized to speak publicly.

China’s growing aquaculture industry has also boosted Chinese demand for canola meal, Lu said. Hog farming faces pressure in China over environmental concerns, but aquaculture faces less opposition, helping it to expand and require more feed, he said.

Reporting for Reuters by Rod Nickel in Winnipeg and Hallie Gu in Beijing, with additional reporting by Michael Hirtzer in Chicago.

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