China delays new canola rules in late reprieve for Canada

By Ben Blanchard

BEIJING (Reuters) - China agreed on Wednesday to delay introducing stricter rules on canola shipments from Canada while both countries work to end a months-long trade spat, offering an eleventh hour temporary reprieve for Canada's farmers.

One day before the new standard was due to go into force, Canadian Prime Minister Justin Trudeau and Chinese Premier Li Keqiang said Canada would be able to continue with the current canola export regime, while a longer-term solution is worked out.

China is Canada's top export market for the oilseed, and Ottawa has taken a strong line in talks on a new standard, which may raise costs for exporters.

The delay may be seen as a victory for Trudeau, as the import dispute has taken center stage during his China visit.

China has said tougher import rules were necessary to prevent the spread of blackleg disease from Canadian canola into Chinese rapeseed, another name for the crop.

"China has no intention of keeping its doors closed to other exporters," Li told a joint news conference with Trudeau.

"But it's also true that Chinese canola producers have their own worries, hoping that imported canola will not carry with it any disease. Chinese consumers also have that issue on their mind," Li added.

Both sides should be flexible, he said.

China had planned to reduce the amount of foreign matter allowed per shipment to no more than 1 percent from 2.5 percent.

ICE Canada canola futures for November delivery rose 2 percent on Wednesday morning.

Even so, uncertainty remains about how long China will delay imposing its tougher standard, said PI Financial broker Ken Ball, who trades canola futures in Winnipeg.

"The market has to accept the fact that there's a risk this thing could pop up at us again," he said.

A Canadian canola trader who was not authorized to speak publicly said it is unlikely additional shipments will be made until China's position is clearer.

Negotiating teams from both countries were meeting in Beijing, Canada's Trade Minister Chrystia Freeland said.

"We are now working on achieving a long-term agreement on terms of Canadian canola shipments and ... we are working to achieve that in the coming days and weeks," she said.

Li also said both countries had agreed to start feasibility talks on a free trade pact at an early date, although Trudeau made no mention of this to reporters.

(Reporting by Ben Blanchard and Beijing Monitoring Desk; additional reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Richard Pullin and Meredith Mazzilli)