Declining EU Canola Production
Experts from Oil World (Germany) have revised their forecast for canola production in the European Union (EU) for 2024, lowering it to 17.6 million tons from 20 million tons in 2023 due to prolonged rainfall adversely affecting crops in France and Germany. The European Commission has also predicted a drop in production to 18.38 million tons. In light of this, Australian analysts are anticipating increased canola demand from the EU this season.
Potential Supply Disruptions in the Black Sea Region
Oil World has also warned of possible reductions in sunflower and canola oil supplies from the Black Sea region due to unfavorable weather conditions. However, this shortfall could be partially offset by increased imports of soybean oil.
Impact of Anti-Dumping Duties on Chinese Biodiesel
Demand is expected to rise following the European Commission’s implementation of temporary anti-dumping duties on Chinese biodiesel and renewable fuels, effective August 16. These duties include a 36.4% tax on 39 Chinese biodiesel exporters and varying rates of 12.8-36.4% on three others. Companies that contributed to the EU investigation will face a 23.7% tax.
Boost to European Biodiesel Production
According to the European Biodiesel Board (EBB), China supplied 1.8 million tons of biodiesel to the EU in 2023, accounting for 10% of total consumption. The anticipated reduction in supply from China is expected to boost European biodiesel production, strengthen demand, and support canola and rapeseed prices, benefiting Australian and Canadian exporters.
Possible Further Measures by the European Commission
The European Commission’s next step might be to impose a tax on imports of used cooking oil from China, which would further support demand and prices for rapeseed and canola.
Weather Conditions and Market Reactions
In Australia, favorable weather conditions are supporting a good harvest, while in Canada, dry weather in July led to significant increases in canola futures prices last week. From July 17-23, the proportion of canola crops in good to excellent condition in Alberta dropped from 71.8% to 48.6% due to prolonged high temperatures and lack of rainfall. In Saskatchewan, topsoil moisture was at 50%.
Canola Futures Market Movements
November canola futures on the Winnipeg exchange fell by 10% over the week to 610 CAD/ton or 440 USD/ton, reflecting a 6.6% decline for the month. This has increased pressure on prices in Paris.
Strategie Grains’ Revised Forecast
Previously, Strategie Grains experts revised their forecast for the 2024 EU rapeseed harvest downwards for the third consecutive time, now expecting 17.27 million tons, almost 14% lower than the 17.80 million tons forecasted a month earlier due to adverse weather conditions.
The combination of reduced canola production in the EU, potential supply disruptions in the Black Sea region, and increased anti-dumping duties on Chinese biodiesel presents a unique opportunity for Australian and Canadian exporters. As the EU grapples with these challenges, the increased demand for canola and rapeseed is expected to support higher prices, benefiting exporters who can fill the gap. The evolving market dynamics underscore the importance of monitoring weather conditions and regulatory changes to navigate this complex landscape effectively.