Two panamaxes bound for European crushing plants, one carrying 60,000t of canola and one coming in to pick its cargo, passed in Geelong in May. Photo: GrainCorp

AUSTRALIA exported 444,297 tonnes of canola in May, down 5425t from the April total, according to the latest data from the Australian Bureau of Statistics (ABS).

Germany on 163,249t and Belgium on 120,017t jointly accounted for 64 per cent of April shipments as European crushers continued to source Australian canola ahead of the local new crop becoming available.

The EU-27-plus-UK crush industry imports around 6.5 million tonnes (Mt) per annum rapeseed to bolster total supply to about 24Mt from which it makes about 10Mt rapeseed oil mainly used for biodiesel.

The import figure has been rising in recent years as strong crush margins clashed with a slide in the profitability of domestic seed production.

According to a USDA Foreign Agricultural Service report, with Brexit the UK became a significant third-country trading partner and the largest export market for EU rapeseed.

EU rapeseed imports primarily come from Ukraine, Canada, and Australia.

In its latest canola supply-and-demand report dated June 30, Lachstock Consulting said the EU was still receiving Australian canola on the cusp of the European and Ukrainian harvests.

“The EU and Ukraine crops are getting bigger, and thankfully so for the EU crushers that are trying to figure out the long-game with where they are going to get their imports from,” the report said.

“Old crop crush rates in the EU continue to fly along, with another record number in May. Crush will fall in the June/July window but margins remain solid down the curve and we expect another strong crush campaign in the year ahead.”

The canola/rapeseed business is a complex global trade and market price relativities are all about timing. Canada itself is set to import Ukraine seed in July/August.

“For Canadian farmers, selling new crop seed is the last thing on their minds as they suffer from a very poor growing season so far.

With the run up in Canadian futures recently, as their crop suffers from extreme heat, Europe has partially gone with it in order to manage their own domestic tightness, but Australia has not.

“If this stays true, it will pose challenges for both Europe and Canada,” the report said.

“In this environment we can expect to see much more Australian business get transacted to non-EU markets, and with the trade doors now open between Australian exporters and these destination markets, along with the sour lessons they learnt last year in being so leveraged to Canadian production, there is a genuine risk this year that an additional 500,000-750,000t of Aussie business finds a home outside of Europe.

“Europe can ill-afford this given they already have a 1.5-million-tonne shortfall until Canada starts pricing again.

“For Canadian farmers, selling new crop is the last thing on their minds as they suffer from a very poor growing season so far.

“In time, either Canada’s crop totally falls apart and the world has to significantly ration crush, or Canada needs to come back to export relevance again. But will it be too late? ”

Last  year some contracts on Canadian canola to Europe were washed out and replaced with Australian, according to Lachstock.

“This year, the roles could very well be reversed.”

Table 1: Australia canola exports in May 2021 held steady on the April tonnage, both one-third lower than March. Source: ABS

Source: ABS, Lachstock, USDA.