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Fungus dispute, big stocks seen behind China-Canada canola conflict

WINNIPEG/BEIJING - A "scientific disagreement" between Canada and China over the risk of transmitting the blackleg fungus is behind China's move to raise its standard for Canadian canola imports, an industry official involved in discussions said.

But some traders say the real reason for a higher standard that may slow Chinese imports is the country's large rapeseed oil stockpiles.

Reuters reported on Tuesday that China's quarantine authority, AQSIQ, told the Canadian Food Inspection Agency (CFIA) it would allow no more than 1 percent foreign material - called dockage - in Canadian canola shipments as of April 1.

The current allowable dockage range is 2 percent to 2.5 percent. Foreign material can include seeds of other plants or straw.

"We're at a stage of scientific disagreement - that really is the issue at its heart," said Patti Miller, president of the Canola Council of Canada, whose board includes exporters Cargill Ltd, Archer Daniels Midland Co and Richardson International. "We're not aligned on the results of the last scientific study that we did."

The countries have collaborated for years on research around blackleg, after China raised concerns in 2009. They have disagreed in the past year about potential blackleg transmission risk to Chinese farms through foreign material in canola shipments, Miller said in an interview.

The Canadian industry sees no significant risk, Miller said, adding that she could not release research results that are in dispute.

AQSIQ declined to comment. The agency's letter to CFIA this week shows that it wants a resolution, but the parties are not done talking, Miller said.

Canola, also known as rapeseed, is crushed mainly to produce vegetable oil. Canada is the world's biggest canola exporter.

The tougher standard will be difficult to meet, and make seed cleaning more expensive, possibly discouraging future sales, exporters say.

China is the largest consumer of edible oils.

The stricter dockage standard allows China to work through high rapeseed oil stocks for the next year or two, an executive with a major Chinese buyer said.

Industry analysts estimate China's rapeseed oil stocks at 5.5 million metric tons.

China subsidizes its farmers' production, resulting in imports sometimes being cheaper than domestic supplies.

Importers are unsure what to do with cargoes scheduled to arrive after April 1, the Chinese buyer said.

Miller said she didn't know how China's new standard would affect sales that are already booked.

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