Selling of accumulated rapeseed oil might be a reason for declining demand on imported canola.
The experts insist that the ending of the main rapeseed oil subsidy project in the country could affect demand on canola in one of the major markets in Canada.
In accordance with the International Grains Council, China’s course on rapeseed stock is no longer valid for the current and next years.
The prices of Chinese rapeseed under this program were much higher than the market ones.
The rapeseed is processed and meal is on sale right after but the oil is put in strategic reserves.
The council’s version is that the authorities in China have reserved six million tones of the oil which is much more that can be taken care of.
In 2015-16 600,000 tonnes of the stock is to be sold in the market which will lower the volumes of canola bought by the biggest importer of this edible oil.
The council is sure that even though the possible consequences of the program are not yet clear, it might affect the internal supply and demand, as well as import.
”The sudden change of plans is the reason of rapeseed market fluctuation in China” said the industry expert G.Powanall with Peter Cremer Canada.
He mentions that while planting it the rapeseed farmers thought they could rely on the subsidy program but ended up having no guarantees in the middle of the harvesting season when the policy was off the table.
Anhui, Henan, Hubei, Hunan, Guizhou, Jiangsu and Sichuan - the main regions where the rapeseed is grown - are working on their local subsidy plans to aid both the agriculturalists and the processors of the rapeseed.
The expert claims that the farmers might either go for selling their harvest in the commercial marketplace which is likely to lower the price tension, or they might horde the crops to express their discontent.
Pownall is positive that due to the withdrawal of subsidy plan Chinese farmers are unlikely to plant the rapeseed this coming autumn.
He estimates the loss of over 30% of the rapeseed acreage in China next year.
This could have been a real opportunity for canola farmers in Canada if only there had been more rains in Alberta and Saskatchewan.
Pownall is not sure at the moment how much canola can be supplied to China taking into account the decline in its production.
After the price escalation Chinese are in the process of canola import backing out.
Pownall is sure that exporters would mainly concentrate on Japanese, Mexican and the US markets which are inelastic in comparison with the Chinese one.
The analyst estimates the production to reach 13.7 million tonnes in Canada which is more than 2 million tonnes less than last year and more than 4 million less than in 2013-14. Other experts have the forecast which is even lower.
The price hike of Canadian canola will ease up the marketing of rapeseed oil the Chinese have in stock which has showed no dynamics recently.
Pownall says that the main concern with the rapeseed is the quality one. The oil can be kept in tanks only for a certain period of time, and a large amount of the rapeseed has been stored in tanks for quite some time already.
The rise in canola prices, however, could take over the quality matter.
“This might be a great chance for China to benefit even more from selling some oil for they are already losing too much on it,” said the analyst.
