China lifts curbs on Canadian canola, demand seen muted

(Reuters) -China has removed a three-year restriction on imports of Canadian canola seed, Canadian officials said in a statement on Wednesday that didn't provide a reason for the lifting of curbs, but trade is likely to be limited by low stocks and high prices.

China, the world's top oilseed buyer, suspended two Canadian canola exporters in March 2019, alleging that pests had been detected in shipments.

Customs officials in Beijing didn't immediately respond to a request for comment.

China's claims, disputed by Canada at the time, came amid political and trade tensions between the two countries following the arrest of Huawei executive Meng Wanzhou in Vancouver for extradition to the United States.

"We welcome this decision to remove the restrictions and immediately reinstate the two companies to allow them to export Canadian canola seeds," said Canadian Trade Minister Mary Ng and Agriculture Minister Marie-Claude Bibeau in a statement.

Low stockpiles of canola, which is crushed into meal to feed animals and oil for cooking, are expected to curb flows of the oilseed to China however.

Canada, the world's biggest producer and exporter of canola, produced its smallest canola crop in 13 years in 2021, pushing buyers to look elsewhere for supplies, and supporting record global edible oil prices.

"This will improve the current shortage of rapeseed domestically. China's two major import sources for rapeseed are Canada and Russia, and there are great supply risks for Russia now," said Haitong Futures analyst Kong Lingqi.

"With the lifting of restrictions, there should be some trade flows but import volumes are not expected to be large because Canada's canola inventory is not high this season. Maybe there will be a larger number of imports after September," she added, as Canada's new crop reaches the market.

China's own canola crop might also keep trade flows from increasingly rapidly, said Johnny Huang, co-founder of Sitonia Consulting.

"China is expected to produce a record volume of canola this year. Soybean production is also estimated to rise this year," said Huang.

Global edible oil prices, from palm oil to soybean oil, surged to milestone highs this year on tight supplies as production slumped and key producers curbed shipments.

(Reporting by Eric Beech, Emily Chow in Kuala Lumpur and Hallie Gu in Beijing; Editing by Tim Ahmann, Marguerita Choy and Kenneth Maxwell)