CommBank agricultural economist Dennis Voznesenski unpacks the drivers behind this year’s 26 per cent increase in Australian canola prices.
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00:00Jess Hi, welcome to ACM AgriCast and we're talking
00:10canola prices. And to do that, we've got Dennis Wozniewski with us. He is an agricultural
00:16economist with ComBank. Tell us about canola prices. How much have they risen so far this
00:22year?
00:23Dennis Well, this year so far, they have risen on
00:24average around Australia by around 26%. So it's been definitely a volatile ride for canola
00:30markets. And we're not by any means, or any stretch of the imagination as high as we were
00:35back in 2022. But we are trading if we look at track prices anywhere from 750 to 780 per
00:41tonne across the East Coast. Now, whether we move back to those type of highs or not,
00:46well, most likely not. And the reason is back then there was several factors all happening
00:51at the same time. We had Russian invasion of Ukraine, we had a shortage of not only
00:55canola around the world, but soybeans and sunflower seed and those issues with palm
01:00oil as well.
01:01Jess So this time around, why have we seen a rise
01:04in canola prices?
01:05Dennis If you look around the world, there's only
01:07so many producers. We have Europe, it's our largest import destination for canola. We
01:12export the vast majority of our canola to Europe. Their production dropped from around
01:1520 million tonnes to 17.3 million tonnes. You look at Canadian production that's gone
01:21from the 19s for millions of tonnes all the way down to also around 17 and a half, 17.8
01:27million tonnes. Previously, you look at Ukraine, they produce around a million tonnes less
01:30than last year as well. Locally, Abares just released their forecast and it's also around
01:34400,000 tonnes lower than last year. So a lot less supply around in the world. And on
01:39the demand side, you have increasing biofuel demand for canola in the Northern Hemisphere,
01:45especially in Europe and in North America as well.
01:49Jess What does the longer term demand look like
01:51for canola globally?
01:53Dennis On average, we produce five to six million
01:56tonnes of canola. We have recently, the vast majority of that has been exported and in
02:00some years as high as 80 plus percent has gone to Europe. There, it's crushed into oil
02:05and meal and the oil is used for biofuels. Now, in Europe, the reason more canola is
02:09expected to be used is because they're phasing out the use of palm oil to create biofuel.
02:15So they're saying we don't want to use palm oil anymore because it's not sustainable.
02:19We want to use canola. So from an environmental standpoint.
02:21Jess And finally, where are canola prices headed
02:24in I suppose the shorter term? A lot of farmers down where I am, including my husband, are
02:29sitting on headers harvesting right now. What's likely to happen with prices over the next
02:35few months?
02:36Dennis They had a pretty strong rally recently to
02:38that level we talked about now. So 750 to 780 per tonne track, that's not on farm. We
02:43were expecting that price move probably closer towards end of Q1 2025 and early Q2 2025.
02:49The reason is, is that harvest would have been wrapped up in all key producing regions,
02:54including Australia. And there wouldn't have been another harvest until June next year.
02:57Jess Dennis Wozniewski, thank you so much for
02:59joining us.