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Chinese protein preference becoming big obstacle for canola

Winnipeg | CNS Canada — As China’s consumption of higher-protein foods continues to grow, so too does its selectiveness for which oilseeds it will pursue on the open market. So far, it’s a race canola does not seem to be winning.

“The big demand factor in China is protein, rather than vegetable oil,” said Felix Muller, global head of softseeds for Cofco International.

Speaking Wednesday at the Grain World conference, Mueller told delegates he expects that in 2017-18, China will take somewhere between four million and 4.4 million tonnes of canola from Canada. That figures is up slightly from last year’s total, which was around four million.

According to Muller, canola has taken a back seat to soybeans largely because the beans container a higher percentage of protein. As well, canola is often more expensive than soybeans or palm oil.

“Soybean crush margins have been superior to canola for an extended period of time,” he said.

He expects Canadian canola exports to China to only rise slightly by 2020 from current levels, to 4.5 million to five million tonnes.

By comparison, China is forecast to import a total of 97 million tonnes of soybeans in 2017-18, according to the U.S. Department of Agriculture.

“So the clear preference to satisfy the protein demand is crushing beans, not canola,” he said.

Further complicating the situation is the general belief that farmers in Canada next year will plant more canola than ever. Some projections call for 24 million tonnes to be produced.

“Where will it all go?” Muller said.

China, he said, can always be persuaded to accept canola but sometimes discounts have to be offered over soybeans.

One silver lining is that China’s crush capacity has risen significantly in recent years, leaving open the possibility that it can accept more oilseeds if and when it needs them.

For Canada to cash in and possibly export as much as six million tonnes of canola in 2020, Muller said, a few things need to happen.

“We need to find more premium outlets in China for the oil,” he said, adding crush margins also have to remain attractive.

— Dave Sims writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.

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