Canola growers can look forward to another year of robust demand from the European Union and reduced competition from a major exporter in 2021-22, say analysts.
Oil World forecasts rapeseed area in the EU 27 will be down slightly to 12.84 million acres, a 4.6 percent drop from last year and well below the 17.28 million acres planted in 2018-19.
Meanwhile, farmers in Ukraine seeded 2.47 million acres of winter canola, a reduction of at least 20 percent. That is the smallest crop in four years.
“Plantings in Ukraine took place in September/October before prices took off,” Oil World co-editor Siegfried Falk said in an email.
Ukraine is one of the primary suppliers to the EU. The upshot is that it should be another good year for Canadian sales to that region of the world.
“The European Union will continue to depend on large imports of rapeseed in 2021-22, given subdued production prospects in the EU and Ukraine and low carryover stocks,” said Falk.
“Canada will remain a key supplier for Europe in the foreseeable future.”
AgPulse Analytica is reporting even smaller Ukrainian canola plantings at 2.18 million acres.
That would result in an estimated 2.35 million tonnes of production, the smallest harvest since 2017-18.
It forecasts 2.2 million tonnes of Ukrainian canola exports in 2021-22, down from the recent average of 2.44 million tonnes.
AgPulse Analytica agreed that winter plantings are also down in the EU. It said French farmers decreased their rapeseed area to 2.47 million acres, a 10 percent drop.
The spring crop has yet to be planted in the EU.
MarketsFarm analyst Bruce Burnett said he thinks winter canola plantings were down in Ukraine primarily due to a lack of fall soil moisture.
“There were some planting issues with the winter canola in Europe as well.”
Burnett also noted that Western Europe experienced the same severe cold snap that Canada had a couple of weeks ago and that likely damaged the winter rapeseed crop.
Rapeseed is more vulnerable to cold temperatures than winter cereals.
He agreed it is shaping up to be another year of strong EU demand for Canadian canola.
The EU was Canada’s second largest customer in 2020, buying 2.52 million tonnes of canola, slightly below China’s 2.58 million tonnes.
China will once again be the big wildcard in the canola market. If it decides to rescind the ban on exports from Richardson and Viterra and return to buying 4.2 million tonnes annually, that would do wonders for prices.
Agriculture Canada is forecasting that Canadian growers will plant 21.48 million acres of canola in 2021, a 4.5 percent increase over last year.
It is forecasting 20.15 million tonnes of production, a 7.6 percent jump.
Burnett thinks the acreage estimate seems a little high. Growers might hesitate to expand their canola acres too much due to high fertilizer prices. Pea prices are attractive and that crop does not require nitrogen fertilizer.
“It’s going to be very difficult for canola to grab a huge chunk of increased acreage,” he said.
That is especially true if new crop bids remain at a $3 to $4 per bushel discount to old crop prices.
“That to me seems to be a bit excessive given how tight we’re going to be for canola at the end of next crop year,” said Burnett.
On the other hand, there are some acres in northern Alberta that didn’t get planted to canola last year due to excess moisture that will likely be seeded this year.
Burnett thinks the forecast for a 7.6 percent increase in production is a bit of a stretch.
“The yield increase is questionable given how dry we are,” he said.
If it remains dry in the spring growers will likely switch to other crops that require less water because there are plenty of attractive options.
Burnett said exporters are going to have to put the brakes on old crop canola sales pretty quickly.
Exports are currently 1.6 million tonnes ahead of last year, which would put 2020-21 ending stocks at an impossibly low level.
Falk said Oil World’s Canadian acreage forecast is about the same as Agriculture Canada’s but its production forecast is lower.
Australian farmers harvested a bumper crop of canola and saw “booming export demand” for the crop in September/October 2020.
“Large canola plantings are to be expected this year in Australia,” he said.
“This will be required to satisfy world demand.”