Canola exports steady, but could be better

(Resource News International) — Canadian canola exports should end up steady on the year, but they could have been larger were it not for high tariffs which limited demand from China, according to industry officials.

Looking ahead to the 2008-09 new crop year, exporters thought inquiries were starting to pick up.

The export pace of Canadian canola during the current 2007-08 crop year is slightly ahead of the year ago, according to Canadian Grain Commission data. As of June 29, Canada had exported 5.15 million tonnes of canola, which compares with 5.06 million at the same point the previous year. While the exports have been steady, market participants thought there could have been more business were it not for the stiffer tariffs on canola entering China compared to soybeans.

Canola destined for China currently faces a nine per cent import tax, which compares with only one per cent for soybeans. The soybean tariff was reduced from its previous level of three per cent in October 2007, while the canola tax was left unchanged.

As oilseed prices moved higher, the eight per cent spread in import taxes between canola and soybeans became more of a detriment to canola sales into China, according to canola exporter Adrian Man, of Winnipeg’s James Richardson International (JRI).

He thought Chinese business for canola had all but disappeared in recent months, but added that current price action was starting to generate some renewed interest. Man pointed out that China imported 873,000 tonnes of Canadian canola during the 2006-07 crop year, but have only imported 588,000 tonnes as of the past month.

Business to Pakistan has also been down on the year, due in part to increased competition from Ukraine, Man said. However, he added, exports to traditional customers Japan, Mexico, and the U.S. were all strong, while Dubai also bought more canola.

“I think at the end of the day, the total exports for this year will end up the same as last year,” said Man. Canada exported a total of 5.48 million tonnes of canola in 2006-07, according to government data.

Fresh business

With attention now turning to new-crop sales, Man thought an increase in inquiries from potential customers in recent days would likely lead to some fresh business.

“We’re a lot closer to some additional offshore business than we were four to six weeks ago, which is encouraging,” added Lach Coburn, Cargill’s West Coast manager of shipping. “The gap has been narrowed, but we’re not there yet,” he said on the potential for sales.

Coburn agreed that the tariff differential between soybeans and canola into China had hurt some of the export potential in recent months, and thought business could have been up on the year if Canada had been more “tariff competitive.” He described export business as being “steady,” but with “room for improvement.”

Looking ahead, neither exporter had heard of anything in the works to lower the Chinese import tariff on canola. However, both also mentioned China as one of the potential customers currently in the market.

Coburn said crop development over the next few weeks will be important, as export customers will be waiting to see if they need to become more aggressive in securing new crop supplies or if they can wait for the opportunity to come to them.

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