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China to resume imports of Canadian canola - sources

BEIJING, March 31 (Reuters) - China has agreed to allow imports of Canadian canola to resume, two sources briefed on the matter told Reuters on Tuesday, lifting a ban in place since March 2019 that had halted $2 billion worth of trade.

The agreement was reached during a call held by China’s customs administration and Canada’s farm ministry on Tuesday, said the sources who declined to be named because of the sensitivity of the matter.

China’s General Administration of Customs could not be reached for comment after office hours. The office of Canadian Agriculture Minister Marie-Claude Bibeau did not immediately respond to a request for comment.

The move to allow imports to resume comes as China’s oilseed processors struggle with the lowest soybean stocks since at least 2010, and as the coronavirus pandemic disrupts the global supply chain of farm produce.

Canola, like soybeans, is crushed into protein-rich meal for animal feed and Canada is the world’s top supplier.

Beijing had said its ban last year was due to quality issues but it came amid tense relations with Ottawa, triggered by Canada’s detention of a top Huawei Technologies Co Ltd CFO.

The two sides also agreed that the percentage of foreign materials in the canola shipments must be below 1%, the sources added.

“The market is worried about oilseed supplies. And there is no energy left for any (trade) fights now,” said another source with a major agriculture products importer.

In 2018, Canada exported C$2.7 billion ($2.1 billion) worth of canola seed to China, a market that accounted for approximately 40% of all Canadian canola exports.

Canadian canola inventories surged to an all-time high in 2019 following Beijing’s ban.

Chinese traders engulfed in on-and-off trade friction over the past two years between China and its major grain suppliers were hesitant about resuming canola imports, however.

“Even though they had a conference call, I am not sure whether the trade channel has really become smooth again. We will need to try and see,” said another source with an importer in southern China.

A standard on foreign materials had been in place prior to the ban but not strictly implemented in the past, buyers said.

“If the standard on foreign materials is implemented strictly, it will surely take longer to offload the canola cargoes that arrive,” said a manager with a Chinese crusher that used to crush Canadian rapeseed before the ban.

He added that he believed it would be hard for shipments to meet the standard unless Canada significantly tightened up inspections.