Why Australian Canola currently is Priced High: Local Demand is Exceeding Supply.

(Updated Oct 27th with even more disasterous forecasts; see here)


Mind the Gap.

Recently there has been speculation that Australian canola has a price-premium over Canada because it is non GM. At the same time the country has been hit by a catastrophic drought.

According to ABARE, Australian Oilseeds Federation are now pegging the current crop at 510,000 tonnes. Taking this as an update of September 2006 ABARE statistics, Pundit prepared the above graph (the 2006/7 value is a forecast only).

Clearly it is highly uncertain where the internal demand of about 400,000 tonnes will come from, as current stocks on hand are unlikely to be that high. Maybe it will be met with imports, or by other oils.

In any case there is a clear explanation for a major portion of the current price spread between Australia and Canada - local market shortages.


See
ABARE www.abareconomics.com australian crop report no. 139 September 19th 2006

Table 5 for canola trends, but 2006/7 forecast is out of date ( 561,000 t production is the Oct 2006 Australian production estimate). The 2006/7 forecast of exports and domest use were retained for the displayed graph.

Canola seed supplies concern for next crop
Farm Online Australia
Wednesday, 18 October 2006

This item reports an Australian canola industry leader has expressed concern over availability of canola seed for next season with failed canola crops across Australia likely to lead to a tightening of canola seed supplies for the 2007 season.
The latest Australian Oilseeds Federation estimate of canola yields for this season came in at just 561,000 tonnes - lower than yields any other time in the past decade.