Rabobank Stefan Vogel

Canola: the ‘war crop’ will fight back in 2024

Global canola production in the current 2023/24 year is at the second-highest level ever, yet prices are still above the long-term average with the three major canola-exporting countries facing issues.

RaboResearch general manager Australia and New Zealand Stefan Vogel said Australian canola production will fall by more than 30 per cent, likely towards five to six million tonnes, from last year’s very strong crop.

“The war in Ukraine is ongoing and its canola exports will be much smaller than last year,” he said. “And the world’s largest canola exporter, Canada, saw its recently-harvested crop down by over 15 per cent on the previous year.”

Mr Vogel said with Ukraine already finished planting canola for the 2024 harvest, it’s timely to take a look at how supply and demand might shape prices in a year’s time.

“The war in Ukraine – and especially the very expensive export logistics costs – has made oilseeds, particularly canola and sunflower seed, a favourite crop amongst the country’s farmers as they are more profitable,” he said. “Canola area in Ukraine has likely reached a record high just shy of two million hectares and, considering a trend yield, this could drive a record crop of over five million tonnes when they harvest in June 2024 – that is 20 to 40 per cent more than seen in the past three years, or about the same volume Australia produces this season.” Mr Vogel said most of Ukraine’s canola will flow into exports to the European Union, further reducing the EU’s import demand for canola from Canada and Australia.

“In Canada, we also have to assume that the weather will turn around and the country will be able to again produce closer to the ‘normal’ 20 million tonnes of canola when they harvest in September 2024.” Mr Vogel said the question is how much of this extra volume will hit the market. “There is still an expectation that Canada’s canola-processing capacity will rise in 2024, but the growth is much smaller than hoped for two years ago when several major oilseed processors announced they would build or expand their canola-processing assets.”

In 2021, Mr Vogel said the extra capacity announced would have increased the country’s processing by over five million tonnes or more than 50 per cent. “However, many of the construction projects have been paused, cancelled or face delays and we expect to rather only see a 25 per cent capacity increase over the course of 2024,” he said. “And that won’t be enough to absorb most of the forecast increase in Canada’s canola crop if the country overcomes its drought, leaving plenty of supply still to go to export markets.”

In the first half of 2024, Mr Vogel said global demand for canola will likely still outstrip supply and therefore keep prices supported. “But, given the outlook for strengthened Canadian and Ukrainian supplies, one has to assume that in 2024 Canadian canola prices will be lower than they are today and that the extra volumes in Ukraine will bolster supplies to the EU, Australia’s core destination market, and might also pressure European rapeseed prices,” he said. “The good news, however, is that we see vegetable oil demand remaining strong globally, with further demand growth coming from the biofuel space in the Americas.”

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