Structural changes in the global market are set to bring future growth opportunities for Australia’s canola industry, according to a newly-released industry report.
With global and Australia canola prices already breaking records in 2021, the report, by agribusiness banking specialist Rabobank, says Australia’s canola industry has more potential upside ahead with policies to curb emissions in North America and Europe expected to lift global demand for oilseeds, and in particular canola, through to 2030.
Over the next decade, government initiatives to curb emissions in the northern hemisphere will fundamentally change, and be the key drivers of, the global canola market, the bank says in the report Global Canola Opportunities in the Sustainable-Fuel Future: Is Australia fit and ready?
“This will present opportunities for Australian canola exports,” says report co-author, Rabobank agriculture analyst Dennis Voznesenski.
“In our base case outlook, these are modest initially, but grow as a result of structural shifts in the global industry in 2024/25 due to Canada’s falling exportable surplus and then again from 2026/27 onward due to the European Union’s increasing canola import needs.”
Global supply of canola in the current 2021/22 season has been severely reduced by drought in Canada, the world’s largest canola exporter, and by continued heavy EU import demand. And this has been benefiting Australia and other exporters, the report says.
Canola prices domestically are edging towards the A$1000 a tonne mark while overseas markets already broke through that level earlier in the year.
A substantial lift in global canola production is expected next season (2022/23) however, the report says, driven by improved seasonal conditions and elevated prices, which will expand acreage worldwide.
“Both will contribute to a large re-supply globally,” Mr Voznesenski said.
“However, in 2024/25, we expect new Canadian crushing capacity to come online to supply a growing renewable diesel sector across North America and this will reduce Canada’s exportable surplus, primarily to price-sensitive markets in Asia and Mexico, but also to Europe.”
Canada typically produces close to 30 per cent of the world’s canola and accounts for around 64 per cent of global exports.
“Then from 2026/27 onwards we expect sizeable reductions in the EU’s use of palm oil as a feedstock for biodiesel as it is phased out to meet sustainability commitments. The feedstock gap created will deliver an opportunity for even greater use of canola in the EU. Even under favourable European growing conditions, we could see EU import demand for canola then rise to levels similar to those of recent drought years.”
Both these factors will lift global demand for canola, the report says.
However just how much Australian canola, and canola prices, benefit will depend on a number of variables. These include how quickly the EU phases out palm oil in biofuels and how much Canadian canola exports drop, as well as how much global production grows and what additional sustainability requirements may be placed on Australian canola.
“While the road to 2030 for canola contains many uncertainties, we can be sure that the global exportable surplus is on a downward trajectory. And this will create opportunities for the Australian canola industry,” Mr Voznesenski said.
“In years when global production significantly underperforms, which it inevitably will, shortages will result in even greater opportunities for Australia.
“Australia can lift canola production, and it will continue to have an export surplus, potentially much larger in periods of supportive price signals and favourable seasonal conditions. However, its capacity to fully capitalise on the opportunities presenting over the course of the decade will depend on meeting sustainability credentials and being ‘fit’ for the future global market.”