UPDATE 3-China boosts Canada canola meal buys over India

Tue Feb 7, 2012 3:31pm EST

* Tongwei Co Ltd to boost buying up to C$240 mln/yr

* China banned Indian rapeseed meal last year

* Canada, China are top canola/rapeseed growers (Updates canola trading, details)

By Rod Nickel

Feb 7 (Reuters) - Chinese animal feed company Tongwei Co Ltd will boost its buying of Canadian canola meal by up to C$240 million ($242 million) annually by 2015, after China banned meal from India late last year.

Canada's agriculture minister Gerry Ritz, who announced Tongwei's plans on Tuesday during a visit to China, said its purchases could be worth C$900 million over the next decade.

Chinese oilseed traders have expected increased imports of canola and canola meal from Canada, the top canola exporter, after China halted purchases of Indian meal because some cargoes were found contaminated with a dye used to brand grain sacks.

"This certainly puts some long-term stability in that (industry)," said Brian Wittal, agriculture analyst at Pro Com Marketing in Alberta. "If we can maintain and hold onto that market, that will be the key thing. The big thing is whether India can adjust and get back into (China)."

Tongwei's plans are a result of research funded by the Canadian government to demonstrate the quality of canola meal for Chinese dairy and aquaculture processing companies, Ritz said in a statement from Chengdu, China.

The Grain Growers of Canada farm group, which is travelling with Canadian officials in China, said Tongwei could buy up to 1 million tonnes of canola meal within five years for aquaculture. The Canola Council of Canada, also on the trip, pegged the value of Tongwei's plans at up to $300 million, including C$60 million worth of canola meal it already buys annually.

ICE Canada canola futures finished higher on Tuesday, even as U.S. grains dipped, and a trader said the news gave prices a lift.

Canola is mainly crushed for its oil for use in salad dressings, margarine and other food products, as well as in biodiesel. The meal is used mainly to feed animals, especially cattle.

China has set a goal of doubling milk production by 2015.

Canola trade between the two countries - the top two producers of canola/rapeseed - has at times been strained due to Chinese restrictions on which of its ports can accept Canadian canola with the fungal disease blackleg.

China was not a significant buyer of Canadian canola meal until 2009.

Boosting trade of canola meal with China allows Canada to diversify its export markets. The United States is by far the biggest importer of Canadian canola meal, but in recent years U.S. regulators refused access to meal from some Canadian plants due to concerns about salmonella bacteria.

That dispute has since been resolved.

Canadian Prime Minister Stephen Harper is touring China this week to discuss crude oil exports and other issues, including agricultural trade.

($1=$0.99 Canadian) (Reporting by Rod Nickel in Winnipeg; Editing by Marguerita Choy, Bob Burgdorfer and Lisa Shumaker)

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