Australian and Worldwide Canola Market Outlook
- By: "Farm Tender" News
- Cattle News
- Jun 06, 2018
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By Samuel Reichstein
As we know, the dry start to the season has resulted in many planned Canola plantings being cut, so what does this actually mean for the Canola market outlook and prices going forward?
Given the poor start to the season it is forecast that only around 40-50% of planned canola area was actually planted in NSW, whereas Victoria would be much closer to 100%. In the west, plantings have been said to be around average and slightly lower than last years.
Naturally the first reaction to less than half of the expected canola crop actually planted in NSW following a poor crop last year is that prices should be well supported. The domestic markets have acknowledged that factor to some extent over the past two months as old crop values have rallied around $30/mt, Port Kembla track, with similar gains in Victoria. However this move has predominantly been in domestic basis with both Canadian and European futures both relatively unchanged over the same period.
Global canola market dynamics have adjusted this year with changes to demand flows as a result of reduced European demand for Non GM canola, given the decision last year by the European Union (EU) to allow imports of cheaper Argentinean processed oil for bio diesel production. This now means that Australia being the major producer of Non GM canola, needs to find the next level of demand given the ‘premium’ market has now been significantly reduced. The next level of demand for Australian canola will be into Asia, and predominantly China. Given Asian markets still have no preference between GM or Non GM product, Australia will need to compete with GM Canola from Canada into the Asian market to find demand.
The disappointing part for the Australian grower in this market dynamic is that Canadian farmers have been tipped to have planted a record amount of Canola this year. They’ve also had good sub soil moisture and have also recently received some decent rain over a large portion of the cropping belt to get the crop off to a good start. This along with relatively solid production in Europe and the Black Sea combined with average forecast production in WA is likely to create a heavy global canola supply and demand (SnD), which will keep global values steady and relatively un-phased with any production concerns for the East Coast of Australia. An average yield across the area planted on the east coast should see domestic demand covered and potentially even an exportable surplus which would also suggest that even domestic markets shouldn’t become too unhinged from global values.
The caveat to the above is that we all know there is a long way to go before production is in the bin. Whilst on paper the market looks to be fairly bearish globally, we clearly need rain across NSW and VIC for what has been planted. Similarly it is still relatively early in Canadian production, China demand is unknown and potentially any blips in trade talks between the US and China could present some short terms opportunities for Canola as a follower of Soybeans.
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