Australia expects canola rebound this year

Attractive prices and improved soil conditions in the country’s main growing regions have renewed interest in the crop

Canada’s canola growers should not count on another year of reduced competition from their top export competitor.

Australian farmers are expected to plant and harvest a much bigger crop in 2020-21 and that will mean stiffer competition in markets like the European Union and China, say analysts.

The U.S. Department of Agriculture expects growers Down Under to seed 5.8 million acres of the oilseed, a 31 percent increase over last year.

Attractive prices and improved soil conditions in the main growing regions of Western Australia, New South Wales and Victoria have renewed grower interest in the crop.

Land that had below average to very much below average root zone soil moisture a year ago is now rated above average to very much above average in key production areas.

The USDA is forecasting an 800,000 tonne rebound in production to 3.1 million tonnes, which is slightly below the 10-year average of 3.28 million tonnes.

Australia is typically the world’s second largest canola exporter behind Canada. The USDA is forecasting a rebound in the country’s exports to 2.2 million tonnes in 2020-21, up 38 percent from this year’s anticipated program.

“About two-thirds of exports go to the European Union, primarily for the biodiesel market,” said the USDA in its March 31 report.

Derek Squair, president of Saskatchewan Exceed Grain Marketing, said another 600,000 tonnes of export competition from Australia is not an “over-the-top” market factor.

“That’s a swing from a good crop to a bad crop for us,” he said.

“It’s substantial but it’s not going to make a huge difference I don’t think.”

It might hurt Canada’s export prospects to the European Union, which has been an important outlet for canola in the wake of curtailed shipments to China.

But Squair isn’t too concerned because Canada has been able to cultivate a number of new export markets elsewhere around the world over the past year and there is a chance China could ease restrictions if COVID-19 prompts some food security concerns.

Edible oil and biodiesel markets have been negatively impacted by the pandemic but he feels that is a short-term thing in the case of edible oil. It is a food commodity with a long shelf-life that may be sought after if the pandemic lingers through summer.

Squair is forecasting that Canada’s spring canola planting to remain flat at about 21 million acres.

Farmers still have to harvest about two million overwintered acres from last year’s crop. How that impacts markets will depend on the quality of the spring-harvested material.

“I don’t see it affecting the edible oil markets a whole lot,” he said.

“The majority of it is going to come in lower quality.”

Squair expects most of the spring-harvested canola will be used to make biodiesel or go into feed markets.

The EU is the big market for biodiesel-grade canola. There are reports that biodiesel production will be down in that region due to COVID-19 travel restrictions.

However, the USDA is still forecasting strong demand from the EU due to dwindling domestic rapeseed stocks.

It said Australia will face stiff competition from Canada in that market because Canadian exporters made some inroads there in 2019-20.

“This shift, however, is also creating opportunities for increased Australian canola sales to China,” said the USDA.

Nearly 90 percent of Australia’s canola is exported during the six months following harvest, in the November through April period.

Western Australia typically accounts for half of the country’s canola production and two-thirds of its exports.

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