Canola’s new market: Europe?

The European Union is increasingly looking like it could be the saviour for the Canadian canola industry in 2019-20.

When it first appeared that the EU’s rapeseed crop was in trouble, analysts were forecasting it could maybe take a few hundred thousand additional tonnes.

These days analysts are forecasting millions of tonnes of new demand.

Lachie Stevens, executive director of Lachstock Consulting, an Australian grain market research firm, said trade sources report that the EU booked one million tonnes of new crop Canadian canola in early July.

In an email, he noted that more business has likely taken place since then due to firmer EU prices.

Stevens believes there could be as much as two to three million tonnes of Canadian canola shipped to the EU in 2019-20, although the high end of that range is unlikely.

A lot depends on whether production falls further in the EU, Ukraine or Australia.

It has been dry in eastern Australia. Lachstock is forecasting 2.5 million tonnes of canola production, which is about one million tonnes below average. But the tale will be told in September and October. The ending number could be 500,000 tonnes higher or lower.

If the 2.5 million tonne forecast is realized Australia will likely export 1.6 million tonnes, primarily to the EU. However, if China wants more Australian seed that will free up space for more Canadian canola in the EU.

Stevens said production in the EU and Ukraine is not meeting pre-harvest expectations, but it is unlikely there will be significant downgrades at this point as harvest is underway.

Another factor is the cost of Canadian canola versus EU rapeseed. There will need to be bigger discounts if EU crushers have to move Canada’s GM glycerol and GM canola meal byproducts to new markets.

His canola export estimates are not far off what Chad Molesky, merchandizing manager for Viterra’s oilseed division, recently told The Western Producer.

Viterra is forecasting a 17 million tonne rapeseed harvest for the European Union, down sharply from the previous five-year average of 21.9 million tonnes.

Molesky expects EU imports of Canadian canola to be just shy of 800,000 tonnes in 2018-19. In the current crop year they could blossom to a record 1.3 million tonnes, or even as high as two million tonnes if Australia’s crop falters.

Brian Innes, vice-president of public affairs with the Canola Council of Canada, said it fortuitous that the EU market is opening up in a big way in a year when China is severely restricting imports.

“The door of opportunity is opening for us and it is up to growers to take advantage of (it),” he said.

The way they can take advantage is by becoming certified to ship canola to the EU’s biodiesel sector. Viterra, Cargill and G3 all run sustainability certification programs.

Innes said the EU crushes as much as 25 million tonnes of canola a year, so if its rapeseed crop comes in at 17 million tonnes there is going to be a serious supply crunch.

There has also been an encouraging development in China.

“There has been a small amount of new sales. That is a change from the past several months,” he said.

Innes was unable to divulge how much Canadian canola China has booked or the timeframe for delivery.

Stevens said China needs canola to support a growing consumer preference for healthier foods in that country.

“There are not many substitutes and Chinese consumers can afford to pay a premium these days if they really want it,” he said in an email.

There is also an expanding market for canola meal in China’s aquaculture sector.

He anticipates there will still be a market for two to 2.5 million tonnes of Canadian canola in China but that is “a stab in the dark” given the uncertain political environment.

If the EU takes two million tonnes and China another two million tonnes there will still be a burdensome supply of Canadian canola in 2019-20, but not nearly as bad as it seemed early on in the crisis.

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