Rapeseed Squeeze Has Canada Eyeing EU Biofuel Amid China Spat

(Bloomberg) -- A lingering trade spat with top buyer China has Canadian canola exporters looking toward the European biodiesel industry to pick up the slack.

Europe’s harvest of rapeseed -- a similar crop to canola -- is expected to plunge to a 13-year low after dry weather crimped plantings and a pesticide ban boosted insect threats. As a result, import demand is set to hit a record 5 million tons in the season that started in July, according to U.S. Department of Agriculture forecasts.

That may be a boon for Canada’s canola industry, which has been rattled by China’s decision in March to revoke import licenses for two companies citing pests found in shipments. It is widely suspected this was done in retaliation against Canada arresting a senior Huawei executive last year at the request of the U.S.

With Canadian canola exports down 9.3% in the 2018-2019 grain year, the industry has started searching for new export opportunities as harvesting of the current crop gets started.

With most varieties genetically modified, European demand for canola as a cooking oil is limited while canola-meal consumption is facing competition from cheaper wheat and barley. Prospects are better in fuel. The EU wants 10% of all transport fuels to come from renewable sources like biodiesel made from rapeseed by 2020.

In recent seasons, the EU has secured most of its canola imports from Ukraine and Australia, with just a 10th coming from Canada, European Commission data shows. Australia, which is expected to have a smaller crop, may be in a better position than Canada to supply China.

“There are still opportunities and we have imported a bit from Canada in the past year,” said David Eudall, head of arable crop market specialists at the Agriculture & Horticulture Development Board.

Europe could import 1 million to 1.3 million tons this grain year, compared with 527,190 tons as of June in the 2018-19 grain year, according to Neil Townsend, a senior analyst at FarmLink in Winnipeg.

Canada’s cheap prices may boost its appeal. Canola futures in New York are down about 7% this year, while rapeseed futures in Paris are up 4%.

According to the Canola Council of Canada, the main thing holding back exports to Europe is that farmers aren’t certified. Spokesman Brian Innes said most growers just need to register and prove their land has been used for farming since 2008.

--With assistance from Olivia Konotey-Ahulu.

To contact the reporters on this story: Ashley Robinson in Winnipeg (Non BLP Loc) at arobinson193@bloomberg.net;Megan Durisin in London at mdurisin1@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net, Steven Frank

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