WESTERN PRODUCER — China’s canola imports are expected to surge in 2022-23, according to the U.S. Department of Agriculture.
It is forecasting that the Asian giant will purchase 2.7 million tonnes of the oilseed, up from 1.9 million tonnes in 2021-22.
But that is still a far cry from the more than four million tonnes the country used to import prior to its recently resolved trade dispute with Canada.
“If that’s all that the increase is going to be for China, then we’re probably going to have a glut of canola,” said Neil Townsend, chief market analyst with FarmLink Marketing Solutions.
“That would be a threat to canola prices because we need that number from China to be more like four million tonnes.”
Canada will have to find other markets to pick up the slack in China but that could prove difficult in today’s macroeconomic environment.
The European Union might buy more due to a lack of supply out of Ukraine. The EU’s crop was supposed to be big this year but production prospects are being scaled back due to drought.
However, Townsend wonders how rising food and gas prices will affect demand for the crop in key markets like the EU and the United States.
“The more messy this macroeconomic situation gets with inflation and interest rate hikes and all that, the more likely we are to see the start of a slowdown (in demand),” he said.
“It’s hard to say with any certainty what the demand will be.”
The USDA says easing tensions between Canada and China is paving the way for increased trade between the two nations, with China recently lifting its ban on canola exports from Richardson International and Viterra.
The improved relations will not have a big impact on 2021-22 imports because Canada had a short crop and imported canola is trading at US$298 per tonne, which is higher than the price for the recently harvested Chinese rapeseed crop.
Improved Chinese production of the crop is what will keep imports below the four million tonne level, according to the USDA.
Chinese rapeseed production is forecast at 14.85 million tonnes in 2022-23, up from 14.45 million tonnes harvested last year.
“The increase reflects area expansion and higher yields due to good weather conditions,” stated the USDA’s Foreign Agricultural Service in its Oilseeds and Products Update report.
The rapeseed harvest concluded in June and there were moderate improvements from last year’s crop in both quality and yield.
Consumption of vegetable oil for food use is expected to rise 6.2 percent in China in 2022-23 to 35.9 million tonnes.
COVID-related lockdowns in several provinces and municipalities caused food service revenue to drop 5.5 percent in the first four months of 2022 compared to the same period a year ago, driving down total consumption numbers for the tail-end of 2021-22.
Ongoing restrictions have led to the postponement or cancellation of most conferences, seminars and banquets in China.
“Accordingly, food service sector vegetable oil consumption has declined significantly along with food service revenues,” stated the USDA.
There has been increased use of vegetable oils at home but that only accounts for about one-third of total vegetable oil consumption for food use.
