The Canadian grain and oilseed sector continues to have an overreliance on Chinese exports, which was illustrated by the Canadian Grain Commission’s August report on exports of Canadian grain and wheat flour.
China imported 796,900 tonnes of grain, oilseeds and pulses during the month, which is the highest level in more than 10 years.
This year does stand out because the bulk of the exports were canola at 718,000 tonnes. This is the best start to the Chinese canola export program on record.
Remember that the August exports occurred before the announcement by the Chinese government that it was going to investigate canola dumped into its market.
It is obvious to everyone that the anti-dumping investigation is linked to the announcement that Canada was going to increase the duties on Chinese electric vehicles to 100 per cent. For good measure, the Canadian government added a 25 per cent tariff to steel and aluminum imports.
Why would China be importing Canadian canola at a record pace before announcing tariffs on canola shipments? The answer, I believe, is quite simple. China is looking to boost its vegetable oil reserves due to tightness in the global palm oil market.
China usually imports five to six million tonnes of palm oil during the crop year. Rapeseed oil imports are usually close to two million tonnes. With palm oil futures trading at nearly two-year highs, Chinese buyers are looking for alternative vegetable oil sources.
China has a huge vegetable oil crushing industry, with the primary feedstock being soybeans. It produces 16 to 18 million tonnes of soybean oil during a crop year.
The second largest oilseed crush is rapeseed (canola), which ranges between six and eight million tonnes. The Chinese domestic rapeseed crop was smaller this year at 15.6 million tonnes, according to the U.S. Department of Agriculture, which has brought on the need for Canadian canola.
The demand for Canadian canola from China has continued through the past six weeks and has propelled canola exports to a record pace for the 2024-25 crop year to date.
Canola exports to week nine totalled 1.95 million tonnes, which is 1.22 million tonnes ahead of last year’s pace. A significant portion of the exports have been to China.
The only year that comes close is 2020-21 at 1.88 million tonnes. In that year 10.6 million tonnes were exported. Canadian canola exports this year are forecast to reach only 7.5 million tonnes. They will need to eventually slow down this crop year.
That means exports to China will likely continue through the first half of the crop year before tapering off in early 2025. With the strong pace of exports to China in the first half of the crop year, most of the export program to China should be complete by mid-January.
What about the import tariffs from the anti-dumping probe? I would speculate that they will be imposed when the Chinese have purchased enough to be comfortable with their domestic vegetable oil situation. The anti-dumping tariffs, if they occur, are likely to be a much more significant factor in the 2025-26 marketing year.
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