Canola and its derivatives, meal and oil, are facing significant geopolitical impacts that also influence global price dynamics.

RaboResearch general manager Australia and New Zealand Stefan Vogel said the reality is that geopolitics and trade restrictions impact global canola markets. “In mid-2024, the EU put high import duties on oilseeds and by-products from Russia and Belarus due to the involvement of those countries in the war in Ukraine. This has since prevented EU imports of canola meal from Russia and Belarus, shutting down a trade flow which, in previous years, exceeded 0.5 million tonnes per year,” he said.

Mr Vogel said while the impact of this on Australian canola producers and exporters has been small, the next wave of geopolitically-motivated disruptions to oilseeds trade may arrive soon and this one might change the global dynamics of canola’s trade flow significantly.

“Canada, the world’s largest producer and exporter of canola, faces heavy canola import duty threats from its key export destination, China, following Canada’s introduction of duties on the imports of Chinese electric vehicles,” he said.

And while Canada is set to have reduced canola export potential this year – with Statistics Canada this month estimating the country’s 2024 canola production to fall below 17.8 million tonnes, the second lowest annual production in a decade and seven per cent down on last year – it will still have an estimated seven million tonnes this season that needs to find a home in global markets.

“And while such Chinese import duties are not yet agreed and implemented,” Mr Vogel said, “Chinese canola importers and buyers are already reluctant to buy Canadian canola”.

“In 2023 and for most of 2024, China was home to well over 60 per cent of Canada’s canola exports. So, rerouting the approximately four million tonnes of Canadian canola that went to China per year would also be felt in Australia as this amount is almost equivalent to Australia’s expected total canola export volumes this season and about 30 per cent larger than those of the world’s third largest canola exporter, Ukraine.”

The Rabobank analyst said in past years when China reduced its canola import volumes, Canada traditionally shipped more aggressively into other key markets in the world, such as its number two canola export destination, Japan – a market where Australia has regained market share over the past three years.

Looking to the years 2017-2021 though, Mr Vogel said, Canada supplied over 90 per cent of Japan’s canola import needs, and such high Canadian market share might be repeated if Canada needs to reallocate canola exports that can no longer go to China.

“The picture is not much different in Canada’s number three and four canola export destination markets of Mexico and United Arabian Emirates, where Canada traditionally supplied the vast majority of canola, and it is only in recent years that Australia has gained market share,” he said.

“Counting the volumes, Canada might be able to gain about one million tonnes of additional canola exports going into each of those countries and Australia canola exports would feel the competition.”

However, Mr Vogel said those major destinations might not be able to absorb all the excess volumes from Canada’s rerouting of Chinese canola flows. And this would likely encourage Canada to also more aggressively move canola into the EU, Australia’s primary canola export destination.

“One might be inclined to think that Australia could easily replace Canada in filling some of the canola volumes into China, but, since 2020, Australian canola imports into China have been hindered due to blackleg disease.  China’s best option to replace the canola shortfall might instead be to increase its imports of other oilseeds and vegetable oils, including soybean and palm oil,” he said.

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