Golden era for canola to continue

Golden era for canola to continue: ABARES

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CLEAR SKIES AHEAD: The outlook for canola is good according to ABARES.

CLEAR SKIES AHEAD: The outlook for canola is good according to ABARES.

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Last year saw some epic gross margins for canola producers and ABARES is flagging a sustained run of high prices.

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THE CURRENT boom for canola producers, with farmers selling 2020-21 crop for record or near record prices, is set to continue for some time yet according to Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) researchers.

Emily Dahl and Rohan Nelson prepared information on the oilseeds sector for the ABARES Outlook report, issued this week.

RELATED: ABARES predicts upward trend in grain prices

They found that Chinese feed demand, which has been strong over the past 12 months, would continue as China's pig industry rebuilds following the African Swine Fever outbreak.

The pair said feed demand would be the major source of interest in the oilseeds sector with biofuel more subdued due to less consumption of fuel during the COVID-19 pandemic.

This is likely to keep the world canola price at a healthy $A637 a tonne (US$491/t), a whopping 19 per cent above the five year average to 2020-21.

In goods news for Australian producers, Ms Dahl and Mr Nelson forecast that the export price for 2021-22 Australian canola was expected to remain largely unchanged from 2020-21, where growers enjoyed prices close or exceeding historic records.

And the good news does not end there.

The recovery from COVID-19 will see biofuel demand return and ensure strengthening demand for oilseeds in the medium term out to 2025, although prices will ease off current record levels due to increasing supply.

Supply is expected to remain relatively tight with higher world consumption of soybeans negating any increases in supply.

The scale of this increased demand is borne out in US ending soybean stocks, which are currently at 3.3 million tonnes, just a fraction of the 25m tonnes available in 2018-19.

ABARES predicts the stocks to use ratio for soybeans to drop to 22pc, some 13pc below the ten year average.

In the short term, all eyes are on South America in terms of production estimates.

The ABARES team said in spite of unfavourable conditions in some key growing areas, Brazil's soybean crop is on track for a record, however its neighbour Argentina is expecting a drop in production after a dry season due to the La Nina event so welcomed by Australian growers.

ABARES predicted a big rise in planted area to oilseed crops in response to the good prices on offer.

Assuming average yields, soybean production globally should rise 5pc to 379m tonnes.

On the canola front, Canada, the world's largest exporter, is likely to grow 5pc more of the brassica, with ABARES flagging a 20m tonne crop, however the EU will remain tight due to a dry start, meaning in the short term demand will outstrip supply.

Locally, it was a good year for canola, with an estimated 4.1m tonne crop, 74pc up year on year and 23pc above the ten year average.

Similar to farmers in other parts of the world, Australian growers are expected to plant more canola next year as they seek to take advantage of higher prices and stored moisture in many key canola growing regions such as southern NSW and north-eastern Victoria.

The story Golden era for canola to continue first appeared on Farm Online.

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