Europe faces canola shortage

An anticipated increase in biodiesel production in the European Union would come at the same that canola production is expected to fall, which bodes well for Canadian exports to the bloc. | Reuters/Susana Vera photo

It’s estimated a focus on organic farming and reduced fertilizer and pesticide use will slash acres

The European Union will double its canola imports by 2030 if the region follows through on its controversial Farm to Fork strategy, says an industry group.

Coceral, a European association of grains, oilseeds and pulses traders, believes that strategy will result in reduced EU rapeseed production and increased canola imports.

The Farm to Fork strategy of converting more land to organic production, reducing fertilizer applications by 20 percent and dropping pesticide use by 50 percent is going to wreak havoc on the crop, said the organization.

Coceral’s impact assessment concludes that EU rapeseed production will fall to between 7.6 and 13.7 million tonnes by 2030, down from 16.25 million tonnes in 2020.

Rapeseed/canola imports will soar to “at least 10 million tonnes” per year, or about double today’s levels.

“Good luck finding that,” said MarketsFarm analyst Bruce Burnett.

That is the equivalent of Canada’s total forecast export program for 2021-22.

With all the new crush plants being built in Canada, the EU would need to source a heck of a lot more canola from the Black Sea region and Australia and they don’t currently produce enough to meet those needs.

Burnett said EU rapeseed production is already on the decline due to existing pesticide regulations.

“It has made it very, very difficult to produce economic yields of rapeseed,” he said.

If the region adds more green initiatives he could easily see production falling to the levels indicated by Coceral as farmers are faced with rising organic acres and the reduced ability to apply fertilizer and pesticides.

“With the yield drag of all three of those things, you’re going to be at the point where the question will be — why don’t I just grow wheat or barley?” said Burnett.

The EU is already Canada’s second largest canola customer. It imported 1.7 million tonnes through the first nine months of 2020-21, ranking behind China’s 2.06 million tonnes.

EU demand for Canadian canola is expected to rise in 2021-22 because the world’s largest biodiesel producer is expected to produce and consume more of the fuel in 2021, according to the U.S. Department of Agriculture.

Biodiesel production in the European Union is forecast at 16.11 billion litres, a 3.7 percent increase over COVID-reduced 2020 levels.

Consumption is forecast at 18.66 billion litres, a 2.6 percent increase over 2020 but not quite back to the pre-COVID level of 18.82 billion litres in 2019.

Biodiesel demand is expected to rebound in 2021 partly because of economic recovery in many member states but also due to increased blending mandates in Italy, the Netherlands, Poland, Portugal, Slovakia, Spain and the United Kingdom in 2021.

“That’s positive news here on the demand side for canola,” said Burnett.

Germany is the top consumer of biodiesel. It is expected to use 3.5 billion litres in 2021, followed by France at 3.26 billion litres and Spain at 1.92 billion litres. Those three countries account for nearly half of the EU’s total.

EU biodiesel use fell by a modest 3.5 percent in 2020 thanks to significantly higher blending mandates in several EU member states and a change in policy preventing excess mandate fulfilment certificates from the previous year being counted in 2020.

The forecast for increased production and consumption in 2021 is good news for Canada’s canola growers and exporters because rapeseed/canola oil is the top feedstock used by the EU biodiesel industry.

It will account for an estimated 39 percent of total feedstock use for biodiesel in 2021.

“The popularity of rapeseed oil is grounded in its domestic availability as well as in the higher winter stability of the resulting rapeseed methyl ester compared to other feedstocks,” stated the USDA.

“This is more important in the northern member states than for those situated in the Mediterranean region with warmer winters.”

Rapeseed oil’s share of the feedstock mix was as high as 72 percent in 2008 but it has since lost ground to used cooking oil and palm oil.

Rapeseed oil prices surged 65 percent between May 2020 and May 2021, forcing some EU biodiesel producers to switch to soybean or palm oil.

But prices are forecast to fall in the second half of 2021 because of a larger EU rapeseed crop, which should win back some market share.

The USDA is forecasting that 5.8 million tonnes of rapeseed/canola oil will be used, a 300,000 tonne increase over last year. That is the equivalent of 14.5 million tonnes of canola/rapeseed.

Palm oil use has been capped at 2019 levels until 2023 and then will be phased out by 2030 because of concerns about deforestation in Indonesia and Malaysia.

France has already excluded palm oil-based biodiesel starting January 2020, and Austria, Belgium and Germany will follow suit in 2021, 2022 and 2023 respectively.

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