China Faces Rapeseed Meal Shortage Amid New Tariffs

China is projected to experience a rapeseed meal supply shortage by the third quarter of this year due to new tariffs imposed by Beijing on imports from its top supplier, Canada. The move, which targets both rapeseed meal and oil, is expected to disrupt trade and leave a significant gap that alternative suppliers may struggle to fill.

Following the announcement on Saturday of a 100% retaliatory tariff on Canadian rapeseed meal and oil, futures on the Zhengzhou Commodity Exchange surged by more than 8%. This sharp price increase reflects concerns within the industry, which was taken by surprise when the tariffs focused on meal and oil rather than the rapeseed itself. The decision has led some experts to predict a severe imbalance in the trade market.

“China’s new policy has immediately disrupted the previously balanced trade scenario,” noted Mysteel, a consultancy, in a report on the development.

The imposition of the tariffs came as a shock to the industry, which had anticipated higher duties on rapeseed oil rather than the meal. “We were all expecting tariffs on the oilseed, but this announcement is a major blow for feed processors who had been planning to import more Canadian meal instead of the oilseed itself,” said a trader based in Singapore.

Rapeseed, known as canola in some markets, is a versatile crop used to produce cooking oil, renewable fuels, and a range of other products. The remaining rapeseed meal is a valuable byproduct, primarily used as high-protein animal feed and fertilizer.

China’s dependence on Canada is significant, with the country importing over 70% of its rapeseed meal from Canada, along with nearly all of its rapeseed. Despite current ample supplies following strong imports in the fourth quarter of 2024, analysts warn that by the third quarter of this year, the stockpiles may be exhausted, leading to a supply crunch.

Limited Alternatives in Global Market

China’s customs regulations permit rapeseed meal imports from 11 countries, including Russia, Kazakhstan, Pakistan, Japan, and Australia. However, the international market is unlikely to offer a sufficient supply to replace Canadian exports.

In 2024, Canada supplied China with 2.02 million metric tons of rapeseed meal, followed by the United Arab Emirates with 504,000 tons and Russia with 135,000 tons, according to customs data. Although China may turn to countries like Russia, Ukraine, or India to bridge the gap, experts believe these nations lack the scale to meet the full demand.

“No country has the scale that Canada has in rapeseed meal production,” said Ole Houe, director of advisory services at IKON Commodities in Sydney. “Australia, for example, simply doesn’t have the surplus or crushing capacity to significantly increase its exports.”

India, which is the world’s second-largest exporter of rapeseed meal, ships approximately 2 million tons annually. However, the cost increase in 2024 limited India’s shipments to China to just 13,100 tons.

Domestic Solutions and Market Adjustments

To mitigate the supply gap, China may have to turn to domestic rapeseed meal production or increase its reliance on soybean meal, another key protein source for animal feed. However, some sectors, notably aquaculture, prefer rapeseed meal due to its higher nutritional value.

In response to the looming shortage, China’s policy documents indicate that the government will increase the domestic planting of rapeseed in 2025, aiming to bolster local supply and reduce reliance on imports.

As the third quarter approaches, the full impact of the new tariffs and supply shortages remains uncertain, but the global trade dynamics of rapeseed meal are set to shift significantly in the coming months.