Canada: Canola might have an Aussie problem replacing China

Canadian canola exporters might need to urgently look for alternative markets in 2025, but they might find oilseed users are already well supplied by Australia.

Another situation might also develop in which Australia and Canada simply switch markets, although there will likely be a period of uncertainty and disruption.

Either way, a reckoning is certainly looming.

China’s anti-dumping investigation of Canadian canola started early this fall. It alleges that increasing Canadian canola imports are artificially low priced, harming its domestic canola growers.

But in reality, the Chinese probe is payback for Canada placing a 100 per cent tariff on imports of Chinese electric vehicles and a 25 per cent tariff on Chinese steel and aluminium.

Canada acted in concert with the United States, which led the charge to cut off imports of cheap Chinese EVs to protect its domestic vehicle makers.

The U.S. would have been displeased if Canada allowed imports of Chinese EVs to then be re-exported to the U.S.

The European Union also put tariffs on Chinese EVs.

This autumn, while the probe was going on, Chinese canola importers brought huge amounts of Canadian product.

In the first three months of this crop year, China imported about 2.3 million tonnes of Canadian canola, up from slightly more than one million in the same period last crop year.

Indeed, China this year has dominated canola trade as never before. From January to October, it bought 75 per cent of the canola seed that Canada exported.

Chinese buyers have now wound down their import orders, expecting restrictions early in 2025.

Meanwhile, the canola industry and the rest of Canada’s economy are bracing for what U.S. president-elect Donald Trump says will be blanket 25 per cent tariffs on all imports from this country and Mexico.

The U.S. buys some Canadian canola seed, but of greater importance are its imports of canola oil. Almost all Canadian oil exports go to the U.S.

In 2023, U.S. imports of canola oil were valued at $6.3 billion and meal imports were $2 billion. American canola oil imports rose in recent years, largely due to its growing renewable fuel sector, which might lose government support under a Trump administration.

In the past, when China restricted Canadian canola, Canadian exporters found other markets.

In 2019, Chinese imports fell to about 1.54 million tonnes from almost 4.9 million the previous year.

To make up the difference, Canada sold 1.3 million tonnes to the EU, up from about 360,000 tonnes the previous year. The following year, EU countries bought even more, 2.5 million tonnes.

The United Arab Emirates increased from about 402,000 tonnes in 2018 to 745,000 in 2019 and 1.25 million in 2020.

Pakistan and Bangladesh also bought large quantities.

If China again restricts Canadian canola, we will once more look to these other markets to fill the gap.

However, the global canola market has changed since 2019. Back then, Australia was a modest player, but has since greatly expanded its exports.

In 2019-20, it produced only 2.3 million tonnes but is now regularly growing more than twice that amount.

The year 2022-23 was a particular standout, when the country enjoyed ideal crop weather and produced a staggering 8.3 million tonnes. This year’s crop is expected to be 5.6 million.

However, since 2020 Australia has been shut out of China as Beijing enforced a zero-tolerance for blackleg disease. Its stringent specification of no more than one per cent of foreign material in shipments further raises the bar.

And so Australia sold to the rest of the world — Europe, Japan, Mexico, and South Asia.

Japan is particularly interesting.

For decades, Canada had the Japanese market practically to itself, regularly selling it more than two million tonnes.

But in 2021 that began to change with Australia gaining market share, partly as a result of the dismally small Canadian crop that year, when it fell to only 14.25 million tonnes from 19.49 million the year before.

Last year, Japan split its buying equally between Canada and Australia, and in 2024, January to October, Australia sold 1.3 million tonnes to Japan compared to Canadian sales of less than 700,000.

Put simply, Canada has had the China market while Australia made strides everywhere else. Could that change?

If China decides to block Canadian canola, would it revisit its worry about Australian blackleg and again allow imports from Down Under?

Australia has a freight advantage to China and could shift some exports from Europe to its neighbour, opening the door for Canada to make sales to Europe.

The U.S. Department of Agriculture forecasts China’s canola imports in 2024-25 will fall to three million tonnes from almost 5.5 million last year.

China, in the three months to October of this crop year, has imported 2.3 million tonnes of Canadian seed and in November might have imported another 500,000 tonnes, so it might already have most of what it needs.

We don’t know what will happen in the new year. Things could get ugly, but then again, maybe it won’t be so bad.

Australia will be a competitor, but Europe and Ukraine have had poor crops and Canada’s is also smaller than expected. Global canola supply is down from last year.

All we can do it hope for the best.

Tags: U.S., markets, Australia, China, export, canola, Canada, imports