Golden canola comes good

Nick Goddard of the Australian Oilseeds Federation (AOF), said he was expecting canola acreage this season to consolidate on the past three years, which have contributed to a quantum leap in Australian canola production.

"I think growers are a lot more comfortable planting canola now, its reputation as a high risk crop has probably dissipated a bit as we've seen the solid yields of the past three years."

Aussie canola production has hovered between 3.5 and 4.5 million tonnes for the past three years, consistently well above the historical average.

New crop canola prices are currently about $530 a tonne delivered port.

Mr Goddard said the difference between canola and cereals in pricing was not as pronounced as at planting during the past two years, but he said the solid, early opening rain meant growers were bullish on canola.

"People like to get their canola in early and we've had really good opening rain in many key growing zones so that has people keen on canola."

Cargill Australia senior canola trader Pierre Colinet said tight US carry-out in the soybean sector was a factor across the entire oilseed complex.

He said Aussie canola was not seeing the entire upside of this spike due to a lack of EU demand for Australian canola.

Mr Goddard said the oilseeds complex as a whole was generally ticking over as expected in terms of fundamental news, however, he said he was keeping a close eye on the burgeoning Chinese market.

"Prices are holding up well and you'd have to say China is playing a large role, both in soybeans and in canola, with their insatiable appetite for oils.

"It hasn't just been a consistent growth in demand, its growing exponentially as the middle class grows."

Mr Colinet said he expected China to be a player in the second half of this year.

"We are seeing no real demand for Australian oilseed exports to China as they sit out of the market, however, it is likely they will come back into the market in the second half of 2014 which will be supportive of prices."

He said the South American soybean crop was currently being harvested which was progressing well and on track for a sizeable crop, but added this had already been factored into the market.

A critical driver of the oilseed market overall is European Union (EU) biofuel demand.

Mr Colinet expected this demand to remain stable.

"There has been no change to the EU biofuels mandates. The EU will be a critical export market for Australian oilseeds this harvest."

The world market got a surprise last week when official Canadian crop forecaster StatsCan cut expected canola plantings for this season to 8.02 million hectares, well down on trade estimates of 8.55m hectares.

Levelling this out, however, was the fact the European Union canola crop was in good condition due to increased plantings and favourable weather.