China May Allow Partial Canadian Canola Imports

Chinese quarantine authorities will allow imports of Canadian canola by some selected crushers located in major growing areas, previously banned because of fungal disease concerns, traders said on Thursday.

The import relaxation, likely to be cleared in the second half of the year, would further boost canola imports from the world's largest exporter to China later in the year.

ICE Canada canola futures rose 11.6 percent in February, the biggest monthly gain since June 2010, on tight supplies.

China's quarantine bureau will allow nine crushers in the country's major rapeseed-growing provinces of Inner Mongolia, Jiangsu, Shandong and Zhejiang to import Canadian canola, several traders said.

Another nine crushers outside major growing areas in the provinces of Fujian, Guangxi, Liaoning have received authorisation to continue to import, they said.

China has restricted imports of Canadian canola since 2009 and only allowed shipments to areas away from the country's major growing areas on worries over the spread of the fungal disease blackleg.

Canada's government said canola exports to China totalled $1.8 billion in 2010.

"The restriction will be relaxed but we don't expect access until the second half of the year when domestic harvest is ready," said a trading manager with an international trading house.

Chinese quarantine officials declined to comment.

Crushers cannot divert cargoes away from arrival ports, which means crushers in inland regions of Inner Mongolia are still unable to import, he said.

"China has to increase imports given the difficulty of raising domestic production," said another trader with a state-owned trading house.

Since putting the restriction in place, China has imported more Canadian canola oil, which is a higher-value product than canola seed. From August 2010 to April 2011, China bought 622,000 tonnes of canola oil from Canada, accounting for more than a third of Canada's total canola oil exports.

China, the world's top soy importer, increases imports of the oilseeds, which are crushed into meal and edible oils, to meet rising demand.

Capacity expansion by crushers in non-growing areas has helped boost purchases since late last year. Canola imports this calendar year could reach 2.5-3 million tonnes, traders estimated, up from 1.26 million tonnes in 2011.

Rapeseed output from domestic harvests in May and June is likely to continue to fall to about 13 million tonnes.is likely to continue to fall to about 13 million tonnes.