China is likely to face a shortage of rapeseed meal in the third quarter of this year. This is due to tariffs imposed by Beijing on shipments from the largest exporter of the product, Canada, which disrupts trade between the countries. As alternative sources are unlikely to make up for the shortfall, a significant impact is expected on the animal feed sector and vegetable oil production.
Rapeseed meal futures traded on the Zhengzhou Commodity Exchange have already risen more than 8% since China announced on Saturday a retaliatory tariff of 100% on imports of bran and oil of Canadian rapeseed, effective March 20.
“The introduction of this tax hike policy instantly broke the original trade balance,” consultancy Mysteel said in a report. The move surprised the market, which had expected surcharges on oilseeds but not on rapeseed meal and oil.
Impact on the animal feed and oil processing industry
The Chinese move has caused concern among animal feed processors. They had been counting on a surge in imports of Canadian rapeseed meal to replace the oilseed. “Everyone was expecting the authorities to announce taxes on rapeseed,” said a Singaporean trader. “But we were all taken by surprise when this announcement came about oil and meal.”
Rapeseed, a widely used oilseed crop, is processed to produce cooking oil and a variety of products, including renewable fuels. The remaining rapeseed meal, rich in protein, is of great importance in animal nutrition and soil fertilization.
China currently imports over 70% of its rapeseed meal from Canada, in addition to nearly all of its oilseeds. Rapeseed, also known as canola, plays an essential role in China’s supply chain, making the new tariffs a worrying factor for the stability of the sector.
Alternatives and challenges in the international market
China has managed to secure a robust supply of rapeseed, meal and oil. This was due to large imports in the final quarter of last year. However, traders and analysts warn that a shortage is inevitable in the third quarter of 2024.
Chinese customs allow imports of rapeseed meal from 11 countries, including Russia, Kazakhstan, Pakistan, Japan, Ethiopia, Australia, India and Belarus. However, international supply is limited, making it difficult to replace the volume previously supplied by Canada.
In 2024, China imported 2.02 million metric tons of bran from Canada, followed by 504,000 tons from the United Arab Emirates and 135,000 tons from Russia. Although alternatives such as Russia, Ukraine and India are being considered, these countries are unlikely to be able to meet all of China’s demand.
“No country really has the scale that Canada has,” said Ole Houe, consulting director at IKON Commodities in Sydney. Australia, the world’s second-largest rapeseed exporter, also faces production and milling capacity constraints, limiting its ability to fill China’s shortfall.
Possible solutions and changes in Chinese strategy
India, a major exporter of rapeseed meal, could be a viable alternative. However, rising prices have limited its shipments to China to just 13,100 tonnes in 2024, far below what is needed to meet demand.
Given this scenario, the market may rely more on domestically produced rapeseed meal or turn to soybean meal as a substitute. Rosa Wang, an analyst at agricultural consultancy JCI, points out that most feed producers in China already use soybean meal as their main source of protein. However, some specific industries, such as aquaculture, prefer rapeseed meal due to its nutritional characteristics.
To mitigate supply risks, China has already announced in its agricultural policy documents that it will increase rapeseed planting this year. This strategy could reduce dependence on imports in the medium and long term, but in the short term, the impact of tariffs imposed on Canada still poses a significant challenge to the Chinese supply chain.
Source: Mei Mei Chu, Ella Cao, Naveen Thukral, Rajendra Jadhav and Muralikumar Anantharaman | Notícias Agrícolas
