China has agreed to pay 4,000 yuan ($586.3) per tonne to farmers for the new rapeseed harvest, a cut of around 10 percent from last year's 4,400 yuan but still enough to support canola imports from Canada, traders said on Wednesday. Even with the cost of freight and an import tax of 9 percent, Canadian canola was still attractive for Chinese buyers by virtue of its higher oil content, they said.
Several traders said Beijing did not cap its targeted purchase volume, but others said they expected the volume to be larger than last year's 1.5 million tonnes. China's rapeseed harvest is seen growing 10 percent this year to about 13 million tonnes.
"If the government buys from the market, it is difficult for some crushers to source enough," said one trader with an international trading house in China. He said crushers in coastal areas but far from major inland producing areas would have to import, while Beijing would ask some large crushers in major producing areas to buy and crush the rapeseed on behalf of the government.
The recent surge of Canadian canola prices has slowed China's purchases over past weeks as Chinese buyers were looking for July and August shipment, said the trader. Chinese importers have booked a record of nearly 2.5 million tonnes of canola imports in the current year as Beijing's stockpiling for state reserves attracted alternative supplies to the market.
"Canadian canola is still cheap given its higher oil content than China's rapeseed," said the trader. Oil content for imports averaged 42.5 percent, or about 12 percent higher than China's rapeseed, with oil content of around 38 percent. Beijing has been buying grains, cotton and oilseeds at higher prices over the past year to support incomes of rural families, particularly after many migrant farmers failed to find jobs in cities this year.
But the government faced a dilemma over its stockpiling policy, since the attempt to help farmers by offering a set price has pulled in imports, pushing market prices down. The government had promised to pay above the market for the new crop but traders and analysts had expected the price to fall from last year's offer.