China rapeseed imports to pick up on rising capacity

BEIJING Mon Dec 12, 2011 4:16am EST

BEIJING Dec 12 (Reuters) - The expansion of China's rapeseed crushing capacity coupled with a lower domestic harvest will lead China to boost imports of the oilseed next year, particularly from Canada, the world's top exporter, traders said.

More rapeseed imports would replace imports of oil and meal, which China increased last year after Beijing moved to restrict imports of Canadian canola -- similar to rapeseed, since 2009.

"The expansion of crushing capacity could prompt the country to import over 2.5 million tonnes next year... and will also shift imports from rapeseed oil and meal to rapeseed," a trading manager with an international trading house said.

Fat crushing margins since October have prompted crushers to snap up supplies of Canadian canola over recent months, although margins over the past week have weakened, traders said.

"Margins have been as high as 500 yuan ($78.56) per tonne for crushers, which have spurred purchases from Canada, where supplies have been snapped up by Chinese buyers," said one industry analyst with the China National Grain and Oils Information Center (CNGOIC).

The centre expected China's imports in 2011/12 (June/May) to reach 1.8 million tonnes, up from 1.3 million tonnes the previous year.

In the first 10 months, China imported 17.6 percent more rapeseed meal, mainly from Canada and India. Imports of meal, used as ingredients for animal feed production, in 2010 surged 391 percent to 1.21 million tonnes.

In 2010, China's rapeseed oil rose 110 percent to 985,324 tonnes, while rapseed imports fell 51 percent on year to 1.6 million tonnes.

Large rapeseed imports could take market share away from soybean, of which China is the world's top buyer. But the rapeseed trade is much smaller than soy, with China's annual imports at more than 50 million tonnes this year.

CAPACITY EXPANSION

Chinese companies built or updated facilities in non-growing areas along the coastal areas after Beijing restricted imports of Canadian canola to the country's major rapeseed growing areas on concerns over blackleg disease since 2009.

Many of the facilities, located in Guangxi, Fujian, Shandong, Liaoning and Guangdong, started to operate this year. Total newly-added capacity is at more than 10,000 tonnes a day.

Canadian grain handler Viterra Inc's rapeseed facilities with annual capacity of 680,000 tonnes of canola in Guangxi's Fangchenggang started operations about two months ago, traders said.

Cofco Co Ltd, the country's largest grain trading house, has completed construction of four rapeseed plants in major growing areas, making it the largest processors in the country.

Officials at crushing plants said some of the facilities process not only rapeseed but also imported soybeans.

"There is not enough supplies to meet such large capacity expansion. Annual supplies from Canada to China would be a maximum of 3 million tonnes while there is little room for domestic output to rise," said the CNGOIC analyst.

China's own production in the past years have been declining, like soybeans, as local governments are offered more incentives to boost grain production, traders said.

"The planting acreage is not looking very optimistic again this season because of lower returns last year. Some farmers have abandoned plantings of the crop," said Lu Yun, an analyst with Shang JC Intelligence Co Ltd (JCI).

The company expects rapeseed acreage to decrease by 6 to 7 percent in 2011/2012 from the previous year. Farmers completed their plantings last month.

China's rapeseed output harvested early this year fell 4.5 percent at 12.5 million tonnes, according to CNGOIC data.

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