Canola prospects look bright

Canola crops across the country are in good condition and prices also are favourable.
Canola crops across the country are in good condition and prices also are favourable.

CANOLA is in full flower and is a bright feature of the Australian landscape at present, with crops generally in excellent condition.

Australian farmers will be pleased to hear that prices for the oilseed have similarly bright prospects with a worldwide demand for oilseeds creating a solid floor in the market that even the appreciating Australian dollar cannot dent.

At present new crop canola values, delivered port, range from close to $620 a tonne in Western Australia to around $580/t in Victoria.

These prices are at decile 10 levels, in the top ten percent on record even though the Aussie dollar remains stubbornly high at US74 cents.

Commonwealth Bank commodity analyst Tobin Gorey said canola was picking up on a broader rally in the oilseeds sector.

"There has been a hefty volume of US soybeans exported to China, while Brazilian soybeans have also been in demand," Mr Gorey said.

Specific to canola, Mr Gorey said there were concerns about frosts in Canada, while European production is down for a consecutive year.

"This is partially to do with reduced plantings, with farmers reluctant to grow the crop due to restrictions on seed treatment choices, and partially due to the dry season," Mr Gorey said.

In terms of demand he said both China and the EU were looking for oilseeds, with the EU, Australia's biggest canola consumer, having a preference for canola ahead of soybeans, primarily for use in biodiesel.

He said prices across the oilseeds complex had risen to back above pre-pandemic levels, even allowing for lower rates of biodiesel usage due to travel restrictions.

The fuel sector is only going to provide further support, Mr Gorey said, as restrictions ease.

"Fuel usage is slowly picking up, creating demand and there is also a less comfortable balance sheet in terms of supply and demand."

Cheryl Kalisch Gordon, Rabobank grains and oilseeds senior analyst, said Europe would be a good customer for Australian canola this year due to the strong demand.

"It bodes very well for Australian exports to the EU this year," Dr Kalisch Gordon said.

However, she foreshadowed some regulatory issues in regards to exports of Clearfield varieties of canola.

"There appears to be a push in France in particular to treat all varieties bred by new methods the same as genetically modified (GM) which will have a big impact on the ability to export Clearfield lines there," she said.

"TT (triazine tolerant) varieties do not come under the ruling as I understand it but it is going to be a big thing for the Australian industry if it does eventually get through, as we estimate at least 20pc of the Australian crop, maybe more, are Clearfield varieties."

Dr Kalisch Gordon said the changes in import practices would make it increasingly difficult for Europe to source canola as virtually no canola from Canada, the world's largest exporter of the crop, would be acceptable under those conditions.

"It is going to mean Europe is going to have to pay more one way or another for the canola they need," she said.

Moving forward, Mr Gorey said traditional harvest pressure on prices as northern hemisphere croppers sold crop fresh off the header had finished earlier than in previous seasons.

He said the market was also closely watching Chinese purchases after massive flooding caused issues with their domestic crop.

"China may look to import more palm or more soy and not necessarily canola, but all three are connected in terms of pricing."

Locally, Brad Knight, Geo Commodities, said some farmers, with good seasonal prospects meaning there was a certain baseline yield likely, had looked to take advantage of the prices currently on offer, but said many others still had all their crop unsold.