China may soon lift ban on Australia canola imports -govt official

SYDNEY, Jan 21 (Reuters) - China may overturn a three-year ban on Australian canola imports within the next few months, a government official said on Monday, in a move that would intensify competition for the oilseed as global supplies remain tight.

China banned imports of canola, or rapeseed, from Australia in 2009 due to concerns that a fungal disease infecting some of the Australian crop would damage domestic production.

Australia, the world's sixth largest rapeseed producer, has been pushing hard for China to resume imports. Chinese officials toured Australia in November 2012, the Australian Oilseed Federation said, and the Department of Agriculture, Fisheries and Forestry market (DAFF) described the meeting as a "very positive technical exchange".

"Negotiations are ongoing and both China and Australia are aiming to finalise a protocol early this year," said a spokesperson for the DAFF's access department who is not authorised to be identified by name.

"China will determine the terms of any access granted to Australian canola and will notify Australia accordingly," the spokesperson added.

ICE Canada canola futures fell 0.6 percent last week, but the market remains underpinned by short supplies. Australia currently exports most of its canola to Europe.

"The global canola balance sheet is extremely tight, Europe is still the major buyer," said David Johnson, general manager, risk and strategy at Emerald Trading Group.

"Having China as a competing buyer of Australian canola would be extremely positive."

The exact details of the talks are not known, but traders said Australian exporters may only be allowed to sell to buyers outside of major Chinese rapeseed growing regions, an agreement similar to one that governs Canadian canola sales to China. This restriction, however, may soon be eased.

Australia is forecast to produce 2.64 million tonnes of canola during the 2012/13 marketing year, a fall of 15.6 percent from the previous year, the Australian Bureau of Agricultural and Resource Economics and Sciences said in December.

Exports are pegged at falling 10 percent to 2.1 million tonnes, ABARES said.

The U.S. Department of Agriculture pegs Australia as the world's sixth largest rapeseed producer, with output for the 2012/13 season forecast at 2.76 million tonnes.

(Editing by Miral Fahmy)