Extreme weather hurts production in the European Union and Australia and creates new markets for Canadian crop
Climate change has created a large new market for Canadian canola for years to come based on comments made by industry officials from Europe and Australia.
Luc Ozanne, managing director of Sofiproteol, the financing subsidiary of a major France-based oil and protein producer, said European Union rapeseed production in 2020 is forecast at 17.04 million tonnes.
That is a 19 percent reduction from the average between 2015 and 2018. It is largely the result of a 17 percent drop in seeded acres as growers abandon the crop in favour of alternatives.
The EU’s shortfall in production has led to a surge in imports. The region is forecast to import six million tonnes of canola in 2019-20, up from about four million tonnes in prior years.
Ukraine will supply 2.9 million tonnes followed by Canada’s 2.1 million tonnes and Australia’s 900,000 tonnes.
Ozanne told delegates attending the International Grains Council’s virtual annual conference that three main agronomic challenges are driving EU growers out of rapeseed production.
The biggest problem is a lack of rainfall. Canola is a thirsty crop and a series of dry autumns have hindered crop establishment in France, the United Kingdom and Germany.
Restricted access to crop protection products like neonicotinoids is a second factor because it is leading to increased crop damage caused by flea beetles.
Lastly, there has been a rise in overall pest pressure. “Drastic actions” are needed to break that cycle in order to give rapeseed a viable future in Europe, he said.
Stephen Arens, managing director of Germany’s Union for the Promotion of Oil and Protein Crops, said Germany is facing a third consecutive year of drought.
Growers planted 2.35 million acres of the rapeseed and will likely produce about 3.2 million tonnes of it. Production was double that amount 20 years ago.
“These changes are mainly caused by the extreme weather events,” he said.
But there are other constraints as well. Germany has new fertilizer requirements encouraging manure use in place of synthetic nitrogen and phosphorous.
Arens also mentioned pesticide bans as a yield-limiting factor. Down the road, he worries that the EU’s decision to regulate gene editing will also hamper the industry.
Reduced EU production has allowed Canadian canola to make big inroads in that market as has faltering Australian output.
The U.S. Department of Agriculture forecasts a rebound in Australian canola production in 2020-21 to 3.1 million tonnes, up from 1.9 million tonnes last year.
Nick Goddard, chief executive officer of the Australian Oilseeds Federation, said that kind of extreme production variability is holding back the industry.
National output swings from two million to four million tonnes, depending on weather factors. Climate change is causing rainfall to migrate to the coasts of the country.
“That dry desert region of Australia is just becoming drier,” he said.
“It’s starting to encroach on (the) cropping regions.”
Australia’s dry weather is preventing growers from adopting hybrids because they want to keep costs in check.
About three-quarters of the country’s acres are planted to farm-saved seed and that is holding back yields.
Australia used to be the dominant canola exporter to the EU but that has changed in recent years with Ukraine and Canada taking over much of the business.
Typically, 77 percent of the country’s exports are destined for the EU.
“That’s primarily going, if not solely going, into the biodiesel market,” he said.
Ozanne said vegetable oil consumption doubled in the EU between 2000 and 2019 to 26 million tonnes per year.
He noted that 47 percent of it is used for food and feed, 46 percent for fuel and seven percent for other purposes.
Part of the increase in consumption is attributable to the surge in biodiesel demand to 17 million tonnes in 2019, up from 12 million tonnes in 2013. Rapeseed biodiesel accounts for 5.5 million tonnes of that market.
COVID-19 is putting a crimp in biodiesel demand. Biodiesel use fell 50 percent in April versus year-ago levels but by December it will likely be closer to an eight percent deficit.
Sofiproteol was originally forecasting an increase in annual EU biodiesel demand in 2020 to 18.6 million tonnes, up from 17 million tones in 2019. Its new estimate is 15.2 million tonnes.
The rapeseed biodiesel portion of that demand will be 5.2 million tonnes, down slightly from the 5.8 million tonnes consumed in 2019.
Arens said EU biodiesel demand for rapeseed should be stable going forward but it won’t increase due to the food versus fuel debate.
Jim Everson, president of the Canola Council of Canada, said there will be plenty of Canadian supply to meet that demand.
An estimated 10 percent of the 2019 Canadian crop was harvested this spring.
“The good news is, the quality of the spring-harvested canola is very good,” he said.
There were concerns that Canadian growers would abandon canola due to the loss of a large portion of the Chinese market but the council believes farmers planted an average crop of about 21 million acres.
Unfortunately, there has been a tremendous decrease in canola oil utilization due to the shutdown of restaurants, cruise lines and sporting events caused by COVID-19.
“It’s a very challenging time,” he said.
Everson expects a full post-COVID recovery in global vegetable oil demand with consumption growing at a pace of 3.5 percent a year through 2025.
Canadian farmers are expected to be producing 26 million tonnes of the crop per year by that time, up from 18.65 million tonnes in 2019-20.