Rabobank says poor rapeseed crops in the European Union and China will cause them to have higher-than-expected canola imports.
The bank’s analysis forecasts four million tonnes of rapeseed-canola demand from the EU in 2012-13, which is 38 percent or 1.1 million tonnes more than the U.S. Department of Agriculture forecast.
Rabobank calls its import outlook for China conservative at 2.3 million tonnes, but it is up from the USDA’s forecast of 2.1 million tonnes.
Adverse fall planting conditions and an unseasonably cold winter are expected to slash the EU’s 2012 rapeseed crop by 1.6 million tonnes, with most of the losses occurring in Slovakia, Romania and Bulgaria.
“Some weather improvement in Western Europe may offset the downgrades, but we remain cautious that even our current (production) estimate may be too high,” said the firm in its May 4 Agri Commodity Markets Research report.
Rabobank believes the rapeseed shortfall in the EU and elsewhere has not been fully priced into rapeseed-canola markets and will provide “further upside to prices.”
The bank is forecasting a combined 2.4 million tonne reduction in rapeseed production in the EU, China and Ukraine, which when added to already tight 2012-13 global soybean supplies will continue to drive the entire oilseed complex higher.
“Global soybean and rapeseed production are both forecast to decline year-on-year in 2011-12 for the first time since 1988-89 and by a record large 28 million tonnes,” it said.
Crop tours confirmed that China will have higher rapeseed yields than last year, but the gains will be more than offset by reduced acreage.
Rabobank expects China will import two million tonnes of canola and rapeseed in 2011-12, up from the USDA’s estimate of 1.8 million tonnes but well below the record of three million tonnes in 2008-09. That will be followed by 2.3 million tonnes of demand in 2012-13.
“The vast majority of its import needs will be sourced from Canada, whereas only some EU countries will import Canadian canola due to GM restrictions,” it said.
Jim Everson, vice-president of corporate affairs with the Canola Council of Canada, said Canada is slowly increasing its share of EU business.
Canadian exporters shipped 156,000 tonnes of canola to the EU through the first eight months of 2011-12 compared to 289,200 tonnes for the 2010-11 campaign and 95,000 tonnes in 2009-10.
Most genetically modified canola traits have full approval in the EU with the exception of Oxy-235, a long deregistered Bayer CropScience trait. That has paved the way for Canadian exporters to ship product to Europe, although there is always a chance that trace amounts of Oxy-235 or some other unapproved GM trait could disrupt trade.
Everson said demand is growing in Europe because of this year’s crop shortage and because some member countries have implemented the EU’s Renewable Energy Directive, which calls for 10 percent of fuel to be biofuel by 2020. That is creating a bigger market for canola biodiesel.
Oilseed exports to China are booming. The country bought 1.84 million tonnes of canola through the first eight months of 2011-12, twice as much as it did in all of 2010-11.
Rabobank said imports could climb beyond its expectations this year and next if China and Canada can resolve a trade barrier surrounding blackleg disease.
Everson said the two countries are working on a joint research project that could soon lead to a resolution of the longstanding trade irritant. The Canadian contingent hopes to present its findings to Chinese authorities before the end of 2012.
On the supply side, Rabobank is forecasting record 2012-13 canola crops of 16.5 million tonnes for Canada and 3.3 million tonnes for Australia. It noted that its Australian estimate could be optimistic, given the potential onset of an El Nino weather pattern that would lead to dry conditions in that country.
“Any weather disruptions in these countries would be significantly bullish for prices,” said the analyst.
Exports out of Ukraine are likely to remain flat or decline in 2012-13 because of a 14 percent year-on-year decline in its rapeseed harvest this year, the lowest level since 2007-08.