China may pay more for canola if standard changes

Winnipeg | Reuters –– Richardson International, one of Canada’s two largest grain handlers, may raise the price of canola shipments to China to reflect Beijing’s costly higher standard, its CEO said Thursday.

The Chinese Embassy in Ottawa said in March that China had delayed to Sept. 1 its new standard for no more than one per cent of foreign material, such as straw and other plant seeds, per Canadian canola shipment. The current maximum is 2.5 per cent.

Such a move would raise seed-cleaning costs for Richardson and other exporters, CEO Curt Vossen said in an interview at the company’s Winnipeg head office.

“That complication will definitely change the specifications with which you sell,” Vossen said. “If people are willing to pay for added services, you’ll try to find a way to accommodate them.

“What you’re talking about is adding a new element of risk, and the logical thing for a seller to do would be to reflect that risk in the transaction.”

China has expressed renewed concerns since December about the possible presence in shipments of a fungus that causes blackleg disease, but exporters suspect China’s motivation for slowing imports is linked to its ample domestic inventories.

Canada is the world’s biggest producer of canola; China is its largest export market.

Richardson recently completed expansion of its grain and oilseed terminal at Port Metro Vancouver, allowing for increased shipping to Asia.

Privately-owned Richardson is one of Canada’s two biggest grain handlers, along with Glencore’s agriculture unit, Viterra.

Glencore said on Wednesday it agreed to sell 40 per cent of its agricultural business to the Canada Pension Plan Investment Board (CPPIB) for $2.5 billion, the company’s latest step to cut debt.

The move doesn’t change competition among grain handlers, or for acquisition targets, as CPPIB is a financial partner and Glencore is focused on paying down debt, Vossen said.

“Situation normal. They had the capacity to take advantage of (acquisition) opportunities before they sold 40 per cent of their ag business,” he said.

Vossen said the U.S. is the most logical place for expansion, and the company is interested in grain-handling and processing assets, as well as crop input dealerships.

Declining crop prices may lower the price tags on potential acquisitions, but Vossen said Richardson is not close to completing any deals.

The family-owned company intends to remain private, he added.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors for Reuters from Winnipeg.