【By Observer News, Yuan Jiaqi】
In August this year, China announced a 75.8% deposit on imported canola seeds from Canada. At the time, some Canadian industry players had a侥幸心理, thinking that China could not find alternative sources in the short term. However, shortly after, it was reported that China had ordered about 50,000 tons of new-season canola seeds from Australia.
Now, a latest transaction may make the Canadian side more anxious. On September 19 local time, Reuters quoted three trade sources saying that COFCO has ordered up to 9 ships of Australian canola seeds, each ship of 60,000 tons.
The total procurement is about 540,000 tons, which is around 8% of China's total canola seed imports last year. An Australian agricultural commodity broker who directly knows the transaction said that all the purchased canola seeds are planned to be loaded between November and next January.
This broker also said, "This is a typical procurement model of Chinese enterprises. They just act quietly, purchasing 9 shipments from several major Australian trading companies."
The report stated that China's purchase of Australian canola seeds indicates that, while the Sino-Canadian trade negotiations remain stuck, China has the ability to find alternative supply sources.
Australia is the world's second-largest canola seed exporter after Canada, but since 2020, it has been excluded from the Chinese market mainly because its products have not met China's import standards.
Reuters reported in July that Australian industry sources said that China and Australia were close to finalizing a framework agreement to meet China's phytosanitary requirements for preventing the spread of blackleg disease. If both sides reach an agreement on the framework, Australian suppliers will send five batches of canola seeds to China, with a total volume of approximately 150,000 to 250,000 tons.
At the end of August, Reuters cited two traders' reports that after China took temporary measures against Canadian canola seeds, COFCO quickly ordered about 50,000 tons of Australian new-season canola seeds, which are expected to be available in October.
According to two sources directly involved in the transaction, the canola seeds purchased by China are expected to be shipped between November and December, and both sides are currently negotiating more transactions. The sources also said that the purchase price was below $600 per ton (including freight).
"From the perspective of China's canola seed pressing profit, this price is very favorable," said a Singapore trader, adding that the canola seeds being transported to China come from Australia's new crop, which will be harvested in the coming months. He said, "The goods will arrive in China around late December or early next year."
Bloomberg reported in August, citing anonymous sources, that China and Australia have not yet reached an official agreement on phytosanitary issues, and the final details of the transaction still need to be finalized. A spokesperson for Australia's Department of Agriculture also responded, saying, "This is a government-to-government dialogue that is being actively advanced, and specific details have not been finalized yet."
Data from Rabobank showed that in the past 12 months, the largest export market for Australian canola seeds was Europe, accounting for 63.5% of the country's total canola seed exports, with Asia accounting for 36%.
An industry insider told Hong Kong media, South China Morning Post, "Australia cannot meet all of China's demand for canola seeds, but it can still provide a considerable amount of exports."
The source also mentioned that although the EU remains Australia's main destination for canola seed exports, the flow of exports may change according to prices and demands. Moreover, when exporting to China, part of the freight costs can be saved, so "it may even bring higher economic returns for Australian farmers."
Vitor Pistoia, senior grain and oilseed analyst at Rabobank Sydney branch, analyzed, "If the current trend continues, the global canola seed supply and demand may still maintain balance, but the trade flows will change: Australia may increase exports to China and reduce supplies to other Asian markets, while Canada will do the opposite."
He emphasized that price is the key factor in determining trade flows, "Importers may use changes in cargo movements to establish new price benchmarks, but ultimately it still largely depends on geopolitical developments and government-level agreements."
On August 12, after nearly a year of investigation, China's Ministry of Commerce issued a notice, determining that imported canola seeds from Canada were sold at dumping prices, and decided to implement temporary anti-dumping measures in the form of deposits. Starting from August 14, a 75.8% deposit will be imposed on all Canadian companies.
The Canadian Globe and Mail reported that after China imposed the temporary deposit, the cost of exporting canola seeds to China soared, quickly losing the second-largest market in the world, worth 4.9 billion dollars. 40,000 canola seed farmers in western Canada lost tens of thousands of dollars per person.
With the harvest season approaching, these farmers now face a declining market price for canola seeds. They are more worried that the current temporary tariff as a deposit may turn into a permanent measure.
According to reports, facing a severe situation, western provinces of Canada are pressuring the federal government to cancel tariffs on Chinese electric vehicles to avoid China imposing additional tariffs on Canadian canola seeds.
On early September, the Premier of Saskatchewan, Scott Moe, led a delegation to visit China. Video screenshot
Early in September, the office of the Canadian Finance Minister confirmed that the federal government has initiated relevant work to review the tariffs on electric vehicles, steel, and aluminum products exported to China, to determine whether the current tax rates should continue to be maintained.
A spokesperson for the Canadian Treasury stated that the import volume of these Chinese-related products has "significantly declined" since the implementation of the tariff measures. Also, the Canadian government had promised to review these additional tariffs one year after the measures came into effect in October last year.
Following this, on the 9th, the Canadian Minister of Agriculture, Heath Macdonald, also revealed that the federal government is indeed "considering" the cancellation of tariffs on electric vehicles to China, with the main goal being to reopen the Chinese canola seed market. However, he still insisted that any decision to lower tariffs must consider the impact on other industries.
Despite Prime Minister Trudeau's announcement this month of a series of trade-related measures, including providing 370 million Canadian dollars (approximately 1.9 billion yuan) in production incentives for the canola industry to alleviate the impact of Chinese retaliation, the canola industry says this move is insufficient and does not fully consider the impact of tariffs on exporters and processors.
Chris Davidson, chairman of the Canadian Canola Council, urged the Canadian government to ease trade relations with China. He bluntly stated that the industry "does not care about or seek" these subsidies. He also suggested that cancelling tariffs on Chinese electric vehicles would help resolve the bilateral trade dispute.
Davidson said he is unsure whether removing tariffs on Chinese electric vehicles would completely solve Canada's canola problem, but this idea should be considered in the process of the Canadian government trying to reach a solution with China.
"From Canada's perspective, tariff issues undoubtedly need to be considered, but we first need to clarify what is needed to resolve this issue, and then decide what methods to take to achieve the goal," he said.
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