State buying and drought boost China's canola imports

China is likely to buy 4-5 cargoes of Canadian canola, or rapeseed, each month until at least May, when the domestic harvest becomes available, because of state buying and fears about a drought, traders and analysts said on Tuesday. Chinese crushers bought four or five cargoes or about 300,000 tonnes, from Canada, the largest canola exporter, last week alone, they said.
"I think imports will continue like this until May when the domestic harvest is available because of the government's stockbuilding plan," said an executive with a major crusher. Traders estimated China's monthly imports will top 300,000 tonnes from January to May, pushing the country's total imports in the year to May to 2-2.5 million tonnes, sharply up from 960,000 tonnes in the previous 12 months.
The price for imported canola is about $400 per tonne, almost 40 percent cheaper than domestic rapeseed, which has been underpinned by Beijing's purchases for reserves. Domestic prices have been supported at 4,400 yuan ($644) per tonne. The government has been paying premium prices for rapeseed and other grains to support farmers. But the state buying campaign also supported ICE Canadian canola last week.
China does not have rapeseed futures, but state buying and worries about drought in some central growing areas sent domestic rapeseed oil futures to their daily limit of four percent on Monday. May rapeseed oil futures rose 122 yuan to 7,272 yuan ($1,063) by 0230 GMT on Tuesday.
China plans to increase state purchases of rapeseed, which is similar to canola but with lower oil content, by another 150,000 tonnes. That brings its total purchases of the oilseed to 1.5 million tonnes, representing 13 percent of domestic production at higher prices, aimed at helping farmers. "They have bought a lot. There are also concerns over possible drought damage," said one trader with an international trading house.
China's drought, which has affected much of the winter wheat crop, has so far only affected a small part of the rapeseed crop and could have less impact than last year's winter storms. Drought hit parts of Hubei and Anhui, major growing areas, but industry officials said rains had eased drought in Hubei while the drought-hit northern part of Anhui was not a major rapeseed area.