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China pushes for tougher standards on canola imports from Australia

SYDNEY - China is pushing for tougher standards on canola imports from Australia and is looking to reduce the amount of foreign material it allows per shipment, in order to curb the threat of fungus, sources familiar with the talks said on Friday.

The move is the latest salvo by China in what is seen by traders as an attempt to cut arrivals of canola, also known as rapeseed, and help sell down bulging vegetable oil stocks at home. The country is sitting on about 5.5 million metric tons of rapeseed oil, enough to meet demand for about a year.

China has already informed the world's top canola exporter, Canada, that from April it would allow only 1 percent dockage or the amount of foreign material, which could include seeds of other plans or straw. The current allowable dockage per shipment is 2-2.5 percent.

It is now in talks with Australia, the world's second-biggest canola exporter, about rules on shipments and two sources familiar with the discussions said China was looking to impose the same standard as it has on Canadian cargoes.

"Australia is in discussions with China about establishing a protocol for the supply of canola - foreign material levels are argued by China to be a quarantine risk," said one of the sources. "China has decided that minimising foreign material to 1 percent will fix the problem."

The Australian trade source said China was concerned that blackleg fungus spores carried on plant debris could potentially contaminate Chinese domestic production.

Australia's Department of Agriculture declined to comment on talks, while China's quarantine authority, AQSIQ, did not immediately respond to requests for comment.

China was forecast to buy 250,000 metric tons of canola from Australia in the year to June 30, data from the Australian Bureau of Agriculture, Resource Economics and Rural Sciences shows. But the tight standards are now expected to curb shipments and help China draw down local reserves.

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.

A second source said that while talks continue, committing to that standard would provide a significant barrier to trade.

"It will be extremely difficult to meet that standard," said the source, an Australian trader.