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Farmers bale a hay crop with a canola field in the background, near Cremona, Alta., on July 16.Jeff McIntosh/The Canadian Press

Canada’s smallest canola harvest in 13 years, resulting from severe drought, is forcing importers such as Japan and Mexico to pay more or scour other countries for the yellow-flowering oilseed.

With the scant available Canadian canola fetching high prices, customers of the world’s biggest canola exporter are leaning more heavily on smaller producing countries or alternative vegetable oils such as palm and soybean oil, adding to global food inflation.

Labour shortages and pests are also eating into those oil supplies.

Both export markets and Canadian crushers, who process canola into oil for food or fuel, and meal for animal feed, are coming up far short of normal supplies.

Canada exported 388,000 tonnes of canola from Aug. 1 through the first seven weeks of the new crop year, down 71 per cent year over year, according to the Canadian Grain Commission.

With little to sell, exporters are mainly executing sales that they struck before drought damage drove up prices, with Canadian crushers buying nearly all available supplies, an exporter said.

“The entire market is still in a bit of shock,” he said.

In virtually all of the countries to which Canada normally exports canola, crushing the seed loses money, owing to canola’s high price, he said.

Most active ICE canola futures trade around $900 a tonne, up more than 70 per cent year over year.

Through the crop year ending July 31, 2022, Canadian canola exports are likely to fall 38 per cent to 6.5 million tonnes, while crushing volumes tumble to 7.5 million tonnes from last year’s record 10.4 million, according to Agriculture and Agri-Food Canada.

Canadian crushers, who include Bunge Ltd. and Archer Daniels Midland, processed 661,968 tonnes of canola in August, the smallest monthly volume in 2½ years.

Australia and Ukraine, which have bigger harvests this year, stand to benefit from Canada’s crop disaster, picking up new sales, said Stephen Nicholson, senior analyst of grains and oilseeds for investment bank Rabobank.

Those countries typically export far less than Canada’s volumes, however, Mr. Nicholson said.

“It’s not like there’s this big reservoir of canola out there looking for a home,” he said. “The importers are the ones that are going to be left out in the cold.”

Canada’s biggest export markets are usually China, Japan, Mexico and the United Arab Emirates.

China is buying only limited volumes of Canadian canola because of low supplies and current high prices, opting instead for canola oil from Russia and Ukraine, according to a China-based trader.

China has for two years barred canola imports from Canadian exporters Richardson International and Viterra, owing to strained relations with Canada. If canola shipments from Canada drop further because of drought, Chinese buyers can turn to alternative animal feeds from soymeal and sunflower meal, and other edible oils as alternatives, industry sources said.

Bids for Ukrainian rapeseed, a cousin of canola, have risen over the past week, as the number of offers from suppliers shrinks owing to declining stocks, APK-Inform consultancy said.

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