Oilseeds: September quarter 2021
Shujia (Charlie) Qin
- Reduced Canadian canola production to tighten global supply, driving up Australian export price.
- Forecast record Australian canola production underpinned by 24% higher area planted and above average expected yields.
- Australian canola export value to increase 31% to $3.3 billion in 2021–22, reaching record levels.
Australian canola export price to rise due to tight supply in overseas markets
The Australian canola export price is forecast to rise to an average of $812 (US$617) per tonne in 2021–22. This is driven by falling Canadian production leading to tighter global supply. World stocks are forecast to fall to the lowest level in over a decade.
Canada dominates world canola exports. As a result, reduced Canadian production has tightened world supply. The Canadian canola price is expected to average US$701 per tonne in 2021–22, 63% above the 5-year average to 2020–21. Reduced Canadian supply has increased demand for Australian canola, supporting higher prices.
The European Union is Australia's primary export market. Reduced Canadian supply has led to high EU canola prices (Canada accounted for 38% of EU canola imports in 2020–21). The EU canola price is forecast to remain high during 2021–22, averaging US$633 per tonne. Although the EU canola price has averaged US$78 per tonne above the Australian export price since March 2021, this price difference is not expected to persist. This is because the price difference was driven by sharply reduced Canadian supply, with the EU canola price tracking movements in the Canadian canola price. Record Australian canola exports are anticipated to ease tightness of EU supply, supporting a convergence of Australian and EU canola prices in 2021–22.
World soybean prices to remain at high levels, supported by demand for soybean oil
World soybean prices increased significantly in 2020–21, and prices are forecast to remain at high levels in 2021–22. Soybean oil prices rose substantially during 2020–21, supporting soybean prices to remain at high levels. The world soybean price is expected to average US$498 per tonne, 28% above the 5-year average to 2020–21.
Tight world canola supply driven by reduced Canadian production
Global canola production is forecast to be 3% lower in 2021–22, driven by reduced Canadian production. Canadian canola production is expected to decrease by 16% to 16 million tonnes in 2021–22. This is a substantial downward revision since the Agricultural Commodities: June quarter 2021. Previously, Canadian production was expected to increase due to an 8% increase in area planted and typical yields were forecast. Since then, hot and dry conditions have persisted. Yields have been downgraded substantially and abandonment or harvesting of canola for forage is expected to occur in some areas.
In other major growing regions, high production is supported by favourable seasonal conditions. For the European Union, production is expected to increase by 5% to 17 million tonnes in 2021–22. Area planted to canola is forecast to be 3% higher and yields 2% higher. For Ukraine, favourable yields are expected to increase production by 11% to 3 million tonnes in 2021–22.
World stocks of canola currently low and not expected to recover in 2021–22
World stocks of canola are currently low, contributing to tight supply and recent price volatility. Stocks declined substantially over 2020–21 in response to tight supply and strong demand. For Canada, stocks fell by 65% to 1.1 million tonnes. Similarly, stocks in the European Union declined by 41%. Overall, world stocks of canola fell by 24% in 2020–21.
In 2021–22, world stocks are expected to decrease by a further 20%, to the lowest level in over a decade. This reflects a further drawdown on canola stocks due to reduced global canola production.
Record soybean production due to higher area planted
Global soybean production is expected to reach record levels in 2021–22, increasing by 6% to 384 million tonnes. Strong global production is driven by higher area planted in response to high prices and generally favourable conditions. In the United States, production is expected to be 6% higher, reaching 118 million tonnes. Similarly, production in Brazil is forecast to increase by 5% to 144 million tonnes, and production in Argentina is expected to increase by 13% to 52 million tonnes in 2021–22.
Although world soybean stocks are forecast to rise, the stocks to use ratio is expected to remain unchanged in 2021–22. Changes in stock levels vary across regions. US soybean stocks decreased by 74% to 4 million tonnes in 2020–21 due to China's soybean imports. Stocks in the United States are expected to remain at low levels in 2021–22. In other regions including Brazil and China, stocks are expected to increase, and overall world stocks are expected to rise by 4% to 96 million tonnes in 2021–22.
High vegetable oil prices supported by tight supply and strong biodiesel demand
Vegetable oil prices remained at high levels in recent months. Despite tight world canola supply, the price of canola oil continues to move in line with the price of soybean oil, which is a substitute for canola oil. High prices are supported by stable growth in food demand for vegetable oil, along with strong biodiesel demand.
Strong biodiesel demand is underpinned by the global economic recovery and high crude oil prices. In particular, the world economic recovery and easing of pandemic-related travel restrictions have supported global oil demand. The anticipated rebound in global oil demand has driven the crude oil price to increase. The June 2021 Resources and Energy Quarterly forecast crude oil to remain at a high price and average US$66 per barrel during 2021–22 – well above prices in 2020. Biodiesel demand is particularly important for markets such as the European Union, with current EU policy requiring 10% of transport fuel of every EU country to come from renewable sources including biodiesel.
Chinese feed demand growing, soybean imports slowing
China leads global feed demand and is a major importer of soybeans. In 2018–19, feed demand fell when China’s pig herd contracted substantially following the spread of African swine fever. Since then, China has been rebuilding its pig herd which has also driven a recovery in feed demand. China’s soybean imports have now surpassed levels prior to the African swine fever outbreak.
Although Chinese feed demand is expected to continue to grow, the pace of Chinese soybean imports has slowed in recent months. This can be partly attributed to China's earlier soybean imports outpacing domestic crush, growing China's soybean stocks. There is also downward pressure on soybean imports due to current high soybean prices, squeezing margins for Chinese processors. As the pace of Chinese soybean imports slow down, this has increased availability of soybean supplies for other markets, putting downward pressure on global soybean meal prices.
Record Australian canola production will meet high import demand in overseas markets
Conditions are expected to continue to be favourable during 2021–22, resulting in record Australian canola production that is forecast to increase by 11% to 5 million tonnes. Area planted has increased by 24% from the previous year, capitalising on high prices and favourable conditions. Yields are forecast to be above average, but not as high as the record yields in 2020–21. Above average yields reflect favourable current conditions and climate forecasts that suggest favourable conditions will persist.
Record Australian canola production will meet strong import demand from markets including the European Union. The volume of Australian canola exports are expected to increase by 15% to 4 million tonnes in 2021–22. High prices are anticipated to support the value of Australian canola exports to increase by 31% to a record $3.3 billion in 2021–22.
The Australian (delivered Melbourne) canola price has risen substantially since April 2021 and is expected to remain high, averaging $778 per tonne in 2021–22, 41% higher than the 10-year average to 2020–21. Prices are supported by tight supply in overseas markets including the European Union.
Opportunities and challenges
Tight canola supply in the EU market
Reduced availability of Canadian canola exports is expected to tighten EU canola supply, posing challenges for EU crushers. EU canola production is insufficient to meet domestic crush demand. In 2020–21, EU canola crush is estimated to have exceeded domestic production by 37%. Stocks are also currently at low levels after declining in 2020–21. Low canola supplies are expected to lead to substitution with other meals and oils. Tight supply in this market presents a substantial opportunity for Australian canola exports.
Price volatility in oilseed markets
Alongside high prices, above normal price volatility is expected to persist throughout 2021–22. This is due to low world stocks and tight supply conditions, which make prices more sensitive to market information such as weather forecast revisions. Low closing stocks in 2021–22 could mean price volatility will persist in subsequent years.
|Agricultural commodities: September quarter 2021 - Report PDF||77||6.2 MB|
|Agricultural commodities: September quarter 2021 - Outlook tables - data tables XLS||12||152 KB|
|Agricultural commodities: September quarter 2021 - Statistical tables - data tables XLS||33||578 KB|
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