Exclusive: China to toughen standard on Canadian canola shipments

WINNIPEG, Manitoba (Reuters) - China plans to toughen its standard for imported Canadian canola starting April 1, reducing the amount of foreign material it allows per shipment, an industry group warned Canada’s exporters and processors on Tuesday.

China’s quarantine authority, AQSIQ, notified the Canadian Food Inspection Agency (CFIA) on Tuesday that it will soon allow no more than 1 percent dockage, or the amount of foreign material per canola shipment, Canola Council of Canada President Patti Miller said in an email seen by Reuters.

“We will be talking about next steps in escalating the issue politically as well as through government channels,” Miller wrote.

The current allowable dockage range is 2 percent to 2.5 percent, said a Canadian-based canola exporter, who did not have permission to speak publicly. Foreign material can include seeds of other plants or straw that gets inadvertently mixed with the shipment.

CFIA had no immediate comment. Miller and officials at China’s consulate in Vancouver could not immediately be reached for comment.

The new standard will be difficult and costly for Canadian exporters to meet, said the canola exporter. Some traders may hesitate to ship canola to China for fear of having it rejected or discounted, the exporter added.

China has expressed renewed concerns since December about the possible presence of the fungus blackleg in shipments, but exporters suspect China’s motivation for slowing imports is linked to its ample domestic inventories, the exporter said.

Traders and industry analysts in China have anticipated the dockage restriction since earlier this year and they attribute the decision to helping sell down China’s large domestic rapeseed oil stockpiles, which deteriorate over time.

China holds about 5.8 million tonnes of rapeseed oil following years of stockpiling.

“The restriction is surely to help sales of state reserves. It could hurt rapeseed imports,” said one trader with an international trading house.

Canola, also known as rapeseed, is crushed mainly to produce vegetable oil.

Chinese buyers have increased imports of Canadian canola for shipment from April to June as crushing margins have improved, said the trader, adding monthly imports may exceed 300,000 tonnes.

China’s quarantine bureau, the General Administration of Quality Supervision, Inspection and Quarantine, or AQSIQ, had no immediate comment when contacted by Reuters.

The Canola Council’s Miller said in her letter that AQSIQ has previously said it would honor shipping contracts already in place.

Rumors about China clamping down contributed to a 2 percent plunge on Tuesday in ICE March canola futures.

China was the biggest importer of Canadian canola during the 2014/15 crop year, buying 4.1 million tonnes, according to Statistics Canada data.

Canada is the world’s biggest canola exporter. Shippers include Cargill Ltd [CARGIL.UL] [CARG.UL], Archer Daniels Midland Co, Viterra Inc [VILC.UL], Louis Dreyfus Corp [LOUDR.UL] and Richardson International.

Chinese authorities notified the Canadian government as far back as 2009 that it would not accept canola with blackleg, but it later agreed to accept it at some of its domestic crushing plants.

Additional reporting by Niu Shuping and Beijing newsroom. Editing by Cynthia Osterman and Christian Schmollinger