Winnipeg | Reuters — Canadian exporters are making small sales of canola to China under Beijing’s stricter terms, an industry group and three sources said, possibly undermining Ottawa’s hardline negotiating stance with the world’s top market for the oilseed.
The dispute over the new shipping standard, which industry groups in the world’s biggest canola exporter warn would cripple $2 billion in trade, threatens to mar Canadian Prime Minister Justin Trudeau’s visit to China next week. The tougher standard on canola takes effect Sept. 1.
Canada’s trade minister told Reuters this week that the trade relationship could not progress until the issue is resolved, prompting Beijing to criticize Ottawa for linking the two matters.
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Trudeau will raise the issue with Chinese leaders next week, a senior Canadian official said.
The sales of the oilseed, which is crushed to produce vegetable oil and animal feed, risk weakening Canada’s negotiating stance with China, since they show trade continues.
While Canadian industry groups say the standard would be expensive to meet, China wants the tougher rule on foreign material in shipments to protect against crop disease.
Cargill, Louis Dreyfus and Parrish and Heimbecker have made sales ranging from about 30,000 to 60,000 tonnes to China for delivery after Sept. 1, according to trade sources who were not authorized to speak publicly.
Louis Dreyfus’s Canadian unit, Cargill and Parrish and Heimbecker declined to comment.
Canada’s biggest canola exporters, Richardson International and Glencore-owned Viterra, however, are balking at China’s new standard.
Viterra could not be reached, while Richardson referred comment to the Canola Council of Canada.
Crossing the picket line?
An industry source said the sales, which may intend to test China’s new approach, weaken Canada’s position, comparing their impact to striking workers crossing a picket line.
Another source said holdout exporters may now feel compelled into sales to preserve market share.
Asked if the sales hurt Canada’s leverage, a spokesman for Canadian Trade Minister Chrystia Freeland said resolving the matter remains a government priority.
Yang Yundong, spokesman for China’s embassy in Ottawa, said the two countries were having “positive consultations” and the issue could be “resolved properly through joint efforts.”
The sales only show that deals are possible under the stricter regulation, but it is “not workable” for most of the roughly four million tonnes Canada annually ships to China, said Patti Miller, president of the Canola Council of Canada.
As of Sept. 1, China will allow no more than one per cent foreign material per canola shipment, down from the current 2.5 per cent maximum.
Miller said China’s move sets “a really bad precedent,” and that agricultural trade should be based on science-based regulations.
Chinese officials have said they are concerned about the crop disease blackleg infecting domestic crops, but traders speculate that the move is due to high Chinese stocks.
China National Grain and Oils Information Centre said last week that stocks of rapeseed were “plentiful,” and demand looked “quite bad.”
ICE Futures Canada’s most-active canola futures dipped slightly on Friday.
— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg. Additional reporting for Reuters by David Ljunggren in Ottawa and Dominique Patton in Beijing.
