March 9 – Australian Canola Acres Win Big in the 2018/19 Crop Shuffle

A few weeks ago, we looked at the record amount of Canadian canola acres that AAFC is predicting. Now let’s take a peek at Australian canola acres.

A few weeks ago, we looked at the record amount of Canadian canola acres that AAFC is predicting.

Now let’s take a peek at Australian canola acres.

In a similar vein to Canada, Australian canola acres are expected to gain more traction on Australian soil.

ABARES – the Australian version of the USDA – is forecasting that for the 2018/19 crop year, Australian canola acres will climb by 8% year-over-year to more than 7 million acres (see chart below).

The reason for the climb is some lower wheat and oats prices, as well as the prices for Australian pulse crop staples like chickpeas and pes going into the gutter.

Assuming an average yield of almost 27 bushels per acre, the Australian canola crop in 2018/19 could produce a little more than 4 million tonnes.

This would be the third-largest crop in the history of Australian canola.

Looking further out (and as shown in the chart below), rotational constraints will impact Australian canola acres

On the demand side, this sort of production can support what ABARES is forecasting to be 3.12 million tonnes of exports. This would be a year-over-year improvement of almost 23%! Based on average growth rates though, this still pales in comparison to Canadian canola exports!

Sidenote: Canadian canola exports are expected to climb a little more than 4% in 2018/19 to 12 million tonnes. Sidenote: Canadian canola exports are now tracking behind the pace needed to hit AAFC’s full 2017/18 crop year forecast of 11.5 million tonnes. The rail transportation issues in Canada might have something to do with that….

A wild card to sustain such an ambitious Australian canola export program is the European Union’s demand for non-GMO canola. Thus far, Australian canola exports to the EU have been relatively strong, but we’ve previously noted how the EU wants more non-GMO canola as these varieties have been cleared as low-fuel gas emitters when it’s converted into biodiesel.

In terms of domestic demand, Australian canola crush capacity is expected to increase marginally. The main reason is it’s not all that cost competitiveness to crush versus soybeans for the Australian livestock industry. Soymeal imports are literally cheaper!

To sum up, the outlook for Australian canola crop in 2018/19 is generally positive. Canola acres are expected to rise and export are expected to remain fairly robust (as shown in the second chart at the bottom of the right-hand-side).

The question that we are becoming more cognizant of though is if whether China might start to let Australian canola back into their market. After all, we know that China will always need to import canola.





H/T: Agriculture
About the Author
Adrian Uzea

Hailing from a farm in Romania’s breadbasket, Adrian’s keen interest in agriculture inspired him to obtain a Master's degree in Ag Economics from the University of Saskatchewan. Adrian provides deep, original insight for Canadian farmers of grains, oilseeds, and other specialty crops to help improve their bottom line. He was previously a Market Analyst with a provider of grain marketing services like DePutter Publishing.