“We have moved into 2023 with considerably more canola than last year, both globally and locally,” said Rabobank agricultural analyst Dennis Voznesenski.

“And while we may see increased demand for Australia’s canola at the very end of 2023 due to increased crushing capacity coming online in early 2024 – and also possibly in May before the northern hemisphere harvest – the year appears far less promising from a pricing perspective,” Mr Voznesenski said.

“Global availability of canola improved significantly since harvests started rolling, from June last year,” he said.

The Rabobank analyst said by mid-2022, Europe harvested 19.5 million tonnes of canola, up 2.3 million year on year (YOY). “From September, Canada, the world’s largest canola exporter, started harvesting 19 million tonnes, up 5.2 million tonnes YOY. And later in the year, Australia harvested a previously unheard-of above seven million tonne crop for the second consecutive year.

“Ending stocks in these three large canola producers are expected to be 1.6 million tonnes (or 72 per cent) higher YOY in 2022/23, according to the USDA,” he said.

Mr Voznesenski said even Ukraine saw a 0.5 million tonne production increase last July, with the harvest of its canola crop planted prior to the war commencing. And the Black Sea grain corridor has allowed Ukrainian canola exports to continue flowing.

“Moving into this cropping season, reports are that EU canola planting increased marginally, with harvest starting in June.

“Canadian May planting – to be harvested from September – is expected to see a slight increase.”

Ukraine’s planting is expected to be down year-on-year but likely not as much as wheat, Mr Voznesenski said, given that proportionately more of Ukraine’s canola is grown in western Ukraine, compared to wheat. “There is also an increased focus in Ukraine on higher-value crops that will require less freight to transport.”

The Rabobank analyst said in Australia, so far, farmers are positive about planting canola following a reduction in the cost of urea, but acreage will still likely be down on last year.

“In anticipation of new domestic demand in Canada, we may see a slowdown in its canola exports in very late 2023 during Australia’s harvest, adding a bit more support than normal during that time period,” Mr Voznesenski said. “However, it will depend on crush plant construction running on schedule – something that cannot be guaranteed. Canada is set to finish constructing over three million tonnes of new canola-crushing facilities in early 2024. In order to fill this additional local demand, Canada’s typical 10 million tonnes of export will have to decline.”

Mr Voznesenski said the rest of the year looks far less exciting for prices. With global supplies of canola and soybeans higher year on year, we will see the world well supplied with oilseeds outside these windows, barring another war or significant drought in Europe or Canada. So AUD1,000 tonne price levels seen last year are far less likely in 2023.

“The canola industry should closely watch the German environment minister’s proposal to cabinet to phase out crops from the country’s biofuel mix in favour of more waste product,” he said. “Currently, over 70 per cent of the inputs used in European biofuels come from crops, so they would be very difficult to substitute out in the short to medium term. While the policy is not expected to pass in its current form, a watered-down version may at a future date.”

May this year could, in theory, see a period of increased international canola demand, following Australia’s harvest pressure and prior to the mid-year northern hemisphere harvest, Mr Voznesenski said, however, there is still more local canola than ever before to churn through.

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