The big harvest is unlikely to cut into Canadian sales because of reduced production in the Black Sea region this year
Canadian canola exporters are going to face stiff competition from Australia but that is not too concerning due to smaller crops in other regions of the world and a brisk Canadian export program, says an analyst.
The Australian Oilseeds Federation is forecasting 3.34 million tonnes of production, which is about one million tonnes more than last year.
“A return towards La Nina has had the expected results with generally wetter-than-average conditions on the east coast and drier-than-average conditions on the west coast,” AOF executive director Nick Goddard said in a news release.
New South Wales and Victoria are forecast to produce a crop that is 50 percent above the five-year average, while West Australia will be down about 20 to 25 percent.
The United States Department of Agriculture forecasts 2.4 million tonnes of Australian exports, up from 1.8 million tonnes last year and 1.5 million tonnes the year before.
Neil Townsend, chief market analyst with FarmLink Marketing Solutions, isn’t concerned about the increased competition.
“The market probably needed that million incremental tonnes from Australia,” he said.
That is because there has been a reduction in Black Sea production.
The USDA reports that Russia and Ukraine each produced 2.5 million tonnes of the oilseed, down from 3.47 and 2.04 million tonnes last year, respectively.
That’s a decline of about 500,000 tonnes or half of Australia’s net gain.
Townsend said Canada is in good shape anyway because early-season demand for the crop has been outstanding.
Exporters shipped out 3.66 million tonnes of the crop through week 15, a 34 percent increase over the same time a year ago.
Crushers consumed another three million tonnes, which is similar to last year’s levels.
He expects the Australian crop to be hitting the market hard in December and January and then petering out.
“The pace at which we’re exporting canola right now, it’s not going to hurt us too much,” said Townsend.
The European Union typically accounts for 83 percent of Australia’s canola exports. It has become one of Canada’s top customers as well.
Australia will lose some of its freight advantage to the EU this year since more of the production occurred in the eastern part of the country than the western part.
The one thing that concerns Townsend is that there may be a looming lull in European biodiesel demand as a second wave of COVID-19 grips the region.
People won’t be commuting to work or traveling to restaurants and shopping malls as much as they were when restrictions were temporarily lifted.
The USDA is forecasting that EU biodiesel and renewable diesel consumption will fall six percent in 2020 to 18 billion litres from 19.14 billion litres.
“The decline is expected to be less than the decline for the entire diesel and renewable pool since some increases in overall blending are expected,” stated the USDA in a recent agricultural attaché report.
The report also contained better news for the industry, noting that the use of rapeseed oil as a biodiesel and renewable diesel feedstock will only fall three percent to 6.1 billion litres from 6.3 billion litres.
Canada should expect increasing competition from Australia in the years to come. The AOF has prepared a strategic plan for 2020 through 2025.
The target is to grow the Australian oilseed sector to a $5 billion industry over the next five years, up from $3 billion today.
In addition, a moratorium on the commercial cultivation of genetically modified canola was lifted across mainland South Australia earlier this month.