Rapeseed is the latest victim of a trade war between China and Canada. China imports 40% of Canada's crop each year, but the country has now closed its borders to this oilseed from North America.
In March, China rejected a shipment of rapeseed from the Canadian company Richardson International. The reason given was that this cargo contained 'dangerous organisms'. However, the Canadians are confident that product quality plays no role in this dispute.
According to Canada, the true cause must be sought elsewhere. In early December, the country arrested the CEO of the Chinese tech company Huawei, on behalf of the United States (US). Huawei would like to build a 5G network in the country, but the US sees this as a spy network for the Chinese. To retaliate, China has now closed the border to Canadian rapeseed.
Last year, the country bought about 40% of Canada's crop, worth $2,1 billion. In 2017, 4,5 million tons of rapeseed and 1 million tons of rapeseed meal were imported.
No stress
It is not the first time that China has used the commodity as leverage to force a deal, as this also happened in 2016. It then fizzled out. However, Justin Trudeau, the Canadian Prime Minister, remains optimistic about a solution, but in the meantime there is little movement on the matter.
Canadian crop farmers are angry about the trade dispute. The price continues to fall and is now at the lowest level since July 2018. In 2018, China imported 5,6 million tons of rapeseed, according to figures from the United States Department of Agriculture (USDA). This volume has been on the rise significantly since 2015, having recovered from the decline in imports.
The country saw a significant decline in the area last year, mainly due to unfavorable growing conditions. In some provinces the surface area even fell by 30%, market analysts report. The harvest would amount to 14,1 million tons last year, which is a decrease of 200.000 tons compared to 2017. However, government figures speak of a stable area.
European situation
The international rapeseed market largely bypasses the European Union (EU). The EU is in a special situation. The area in the largest countries (France, Germany, Poland and the United Kingdom) is declining sharply. The estimates from the European Commission and the market agency Strategy Grains put the average area at 15%, reducing the area to 6 million hectares. Due to the drought, there has been considerably less sowing. The lack of seed coated with neonicotinoids has put pressure on cultivation in recent years.
USDA expects slightly more oilseed rape to be harvested worldwide, which means that production and consumption will be about the same and the world supply will decrease slightly. The impasse in rapeseed and soy does not benefit everyone. Louis Dreyfus Company presented Positive annual figures on Monday, March 25, mainly due to gains in the oilseeds branch. This resulted in profit increasing by 13%.
Depending on import
Due to the declining acreage, the EU is importing more and more soy, especially from the region around the Black Sea: Romania and Ukraine. A volatile and higher price is expected for the coming season (2019/2020), as the EU is more at the mercy of a volatile global market. To meet the significantly increased demand, the area in Ukraine has increased by almost 30%. That does reduce the price somewhat.
The quotation for rapeseed reached the highest level of this year at the end of January on the Matif in Paris: €380 per tonne. This was last the case at the beginning of November. The price then went into a free fall, reaching a low of €351,75 per tonne. With fits and starts it went up again. Another factor is that the global market for oilseeds is under pressure and less and less biofuel is being produced.