Friday, November 13, 2009

China plays games on canola

Some interesting debate is circulating on the China trade front as the country’s Nov 15 deadline looms where all shipments must be accompanied by a certificate stating absolute zero blackleg tolerance. Given the widespread nature of the disease, it is impossible for any supplier to attach such a guarantee.

As it stands today, the Chinese government is maintaining a hard-line position on this issue, which would mean no further canola sales will be made to China from Canada after Nov 15 - a country which last year represented a third of all Canadian exports.

Rumors circulating the export sector suggest all kinds of reasoning behind the sudden ‘hard to get’ nature of Chinese business; from legitimate Chinese concerns on blackleg to the Chinese playing a game to knock down canola prices, and a back door rationale to reduce built up Chinese canola/rapeseed stocks by restricting more attractively priced imports.

Whatever the reasons there is certainly a sense of underhandedness in the Chinese position and one has to question China's willingness to uphold the rule of law and contract in their dealings. Unfortunately, they are such a large global player, they cannot be ignored - and they know it.

The trade thinking is that a resolution could coincide with a scheduled visit to China on December 2-6. In the meantime, even if that emerges as the common view, the grain trade will likely gear up for a month waiting and/or defer shipment. It is highly unlikely in this waiting period that any more fresh business to China gets done until the green light is again lit.

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