Market Analyst Says China Canola Dispute Could Create Short-Term Opportunity

China's decision to stop imports of canola seed from Winnipeg-based Richardson International hasn't had a huge impact on the markets, however it hasn't helped either.

That from Neil Townsend, chief market analyst with FarmLink Marketing Solutions.

"A lot of the damage had been priced in before the actual declaration. We've been really struggling on the canola futures side," he said. "More importantly, in the countryside we've been hearing reports, these are all anecdotes, of people who have canola sold say to Richardson or even some other companies, that they are saying 'don't deliver it' or 'we'll tell you when to deliver it', just a very slow market overall."

Townsend believes the move by China was politically motivated and says the big question right now is whether other companies will be affected.

"China is legitimately mad at us," he commented. "I don't for a minute believe that the reason why Richardson's cargoes are being prevented to go there is because they found some seeds or weeds or whatever in there. It's a retaliation for the Huawei thing. Again, I don't have proof of that information about what the Chinese are doing but to me that's the simplest explanation. So I would say that other companies, and Canadian canola, there could be further discrimination against us into that market."

He notes we could see lower than expected canola acres seeded in Canada this spring, adding farmers are usually the last to react to fluctuations in the market.

"Until they really know, they kind of stick with their rotations, make some minor adjustments around what's more profitable. But I think this had unnerved them, this news about Richardson, and the more definitive impact that China seems to be wanting to put on Canadians and Canadian farmers ultimately. We've lost some acres for now. Now again there's some time before planting. I think the canola acres were planning to go in a little bit lower than last year but now probably we could have lost potentially about a million acres just in one day because of farmer reaction."

Townsend says the current spat with China could buy us demand from other countries, with many Canadian farmers looking to sell their canola. He notes that in the long term we need China, however there could be some opportunities for farmers in the immediate future.