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WINNIPEG, Manitoba (Reuters) - China's state-owned Sinograin will increase Canadian canola oil imports next year, the Canadian government said on Saturday after failing to secure broader access to the market for Canada's exports of the oilseed.
Sinograin, which manages China's grain reserves, plans to import 350,000 metric tones of Canadian canola oil in 2010, an increase of 200,000 metric tones, the Canadian government said in a statement.
But a visit by Prime Minister Stephen Harper and two Cabinet ministers did not lead to any easing of Chinese restrictions against canola seed.
Canada is the world's largest exporter of canola, a variant of rapeseed that is mainly processed for use in cooking oil and biofuel. China was its top export market for canola seed last year and shifts in Chinese demand are watched closely by traders.
The Canola Council of Canada estimates the increased sales to Sinograin, one of several Chinese importers of Canadian canola oil, will be worth C$180 million ($170 million).
"It will certainly help as we're expanding (Canadian) crush capacity to have additional customers," Dave Hickling, vice-president of canola utilization for the Canola Council, said in an interview.
Cargill expanded its Clavet, Saskatchewan, crushing plant last summer, while two plants are under construction at Yorkton, Saskatchewan. One is owned by James Richardson International and the other by Louis Dreyfus and Japan's Mitsui & Co. Crushing plants process the canola seed into oil and meal.
While China is a major market for Canadian canola and its oil, its demand varies widely from year to year. China was Canada's second-biggest canola oil export market after the United States last year, importing 361,800 metric tones through the first 11 months of the 2008/09 crop year, according to the Canola Council of Canada website.
The announcement came after Canadian Agriculture Minister Gerry Ritz and International Trade Minister Stockwell Day traveled through China with Harper. China since November 15 has restricted Canadian canola with blackleg disease to lesser-used ports away from China's rapeseed-growing areas.
"While we welcome the news that Sinograin is committed to purchasing more canola oil, we remain deeply concerned about the continuing quarantine on our canola seed," Canola Council President JoAnne Buth, who was also in China this week, said in a statement.
Harper raised the issue with Chinese Premier Wen Jiabao, the statement said.
Blackleg is a disease caused by a fungus that can kill the canola plant. It is commonly found on Canadian canola and is also present in other major rapeseed growing areas, including China. Chinese officials have said they believe Canada has more virulent strains of the disease, Buth said.
Ritz discussed future canola oil exports to China with Sinograin Chief Executive Bao Kexin during the visit, the government statement said.
Additional reporting by Jeffrey Hodgson; Editing by Peter Cooney