Global Markets: Oilseeds – Canada Rapeseed Exports Lowered Following Trade Dispute with China

Canada rapeseed exports are forecast for 2018/19 is reduced 1.0 million tons this month in response to a slowing pace of trade and the recent trade dispute with China. Exports are now forecast to reach 10.6 million tons, down slightly from the previous year.

However, the pace will need to accelerate relative to last year to reach the current forecast as shipments for the 12 months ending in January 2019 have fallen to below 10.0 million tons. To achieve this, Canada may need a quick resolution to the current trade dispute that has cut off access to the China market for the two largest exporters, Richardson International and Viterra, in response to China’s contention that shipments have failed to meet quality standards regarding prohibited pests.

While Canada can potentially locate other markets to cover the shortfall, it may not be easy. Since 12-month exports peaked in late 2017 at nearly 11.7 million tons, exports to markets outside China have remained flat or declined.

Part of the issue is competition from soybeans, particularly from the United States, that has likely contributed to lower demand for rapeseed in the United States, Mexico, and South Asia. And with limited potential to expand trade with Japan, Canada’s second largest market, exporters will face significant challenges for the remainder of 2018/19.

On a more positive note, despite the current restrictions on rapeseed exports to China, exports of products (meal and oil) are currently unaffected. In fact, exports of rapeseed meal and oil to China are up. Since the end of 2016, China’s share of Canada’s rapeseed meal exports has doubled from 15 to 30 percent.

But with crush capacity limited, overall export growth has also been limited at 6 percent. Consequently, the rising share of China trade has come at the expense of trade with other markets, particularly the United States.

For rapeseed oil, a similar pattern exists with a rising share of exports to China, from 21 to 36 percent since 2016, but at the expense of exports to other markets. However, unlike rapeseed meal, oil exports have grown more rapidly since 2016 (12 percent) yet are still constrained by crush capacity.

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