BEIJING (Reuters) - China will boost imports of rapeseed and rapeseed meal from Canada, traders said on Monday, after Beijing banned Indian meal after tests showed it contained a toxic chemical.
If China buys more rapeseed, or canola, from Canada, the world's top exporter, it could firm ICE canola prices, which have been rising for the past two weeks in anticipation of larger imports.
China imported Indian oilseeds worth $161 million in 2011 before halting purchases late last year after tests showed some cargoes were contaminated with malachite green, a dye widely used in India to brand grain sacks.
China bans malachite green from ingredients used to produce animal feed. Traders said cargoes of Indian rapeseed meal loaded after January 1 would be denied entry to China.
"We have been told to stop imports until the two countries have resolved the issue," said one trader with Guangdong Junjie Agriculture Trade Co. Ltd, a major buyer of Indian meal.
"We don't expect the ban will have much impact on supplies. China has been buying from Canada and meal supplies from domestic crushers have also increased, which would fill the gap," the trader added.
A rapeseed meal trader with Guangxi Jiahe Grains and Oils Co. Ltd also said there were few Indian supplies being unloaded now, adding: "We will look into Canadian meal to see if quotations are attractive. But meal from domestic crushers is ample and prices are cheap."
Indian grain exporters said they were working closely with Chinese officials to lift the ban. A Chinese inspection team is likely to visit India in March, exporters said, and China's quarantine bureau said on its website it had informed India of the steps it had to take for the ban to be lifted.
"We have already issued an advisory note to all extraction plants asking them not to buy rapeseed or rapeseed cake packed in jute bags with green identification marks," said B.V. Mehta, executive director of the Mumbai-based oilseed processing body, the Solvent Extractors' Association of India.
Indian rapeseed meal tends to suffer from quality issues, but it is cheaper than both Canadian and domestic Chinese supplies.
China imported a total of 1.2 million tonnes of rapeseed meal in 2011, out of which just over half was from India.
The 648,386 tonnes imported from India represented an increase of 84 percent on the year, while imports from Canada dropped 10 percent to 671,450 tonnes.
Traders say they expect China to increase canola imports by nearly 40 percent in 2011/2012 due to expanded crushing capacity. China will harvest its own rapeseed crop in May and June, and its domestic harvest last year was about 13 million tonnes.
Lu Yun, an analyst with Shanghai JC Intelligence Co. Ltd, said even before Indian imports were banned, China was more likely to increase canola imports from Canada, because it meant higher profit margins for crushers.
"Even without the ban, we expect imports of rapeseed meal (from India) will decrease sharply this year," said Lu.
"China has increased imports of canola from Canada, which had given pretty good margins for crushers earlier."
Rapeseed imports in the first half of the year would increase significantly, with monthly imports hitting as much as 300,000 tonnes, said Lu.
Additional reporting by Naveen Thukral in Singapore; editing by Miral Fahmy