Canola into consolidation phase | My Machinery
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Canola into consolidation phase

After two break-out years, with record production and more acres planted than ever before, Rabobank predicts the Australian canola industry will be scaled back in 2013 due to dry conditions. While it is early days to be considering next year’s plant, and late summer / early autumn rainfall could change the dynamic, Rabobank’s senior grains analyst Graydon Chong said if moisture levels remain the same, it is likely plantings will decline by up to 10pc. But Mr Chong expects this to be just a blip on the horizon of a growing sector, saying the long-term prospects for Australian canola were good. In the near-term, he said a combination of strong cereal prices and the lack of subsoil moisture were likely to see farmers considering substituting canola acres for either wheat or barley. Mr Chong says the spike in grain prices since mid-2012 has narrowed the spread between wheat and canola prices, with wheat increasing in competitiveness on a gross margin basis. “While farmers will delay next year’s planting decisions for as long as possible, they will be starting to look at how the numbers stack up for different crops, particularly those looking to forward market their 2013/14 crop,” he says. In the recent Rabobank report ‘Canola Contraction’ Mr Chong said canola plantings would hover around two million hectares up to 2.1m ha. Although this is down on the past two seasons, even allowing for a very conservative 1.1t/ha yield, it mean total production of 2.2mt, which is well above average. Mr Chong said he thought canola prices would hold up reasonably well, given tight balance sheets in the oilseeds complex. “The tight balance sheet for oilseeds will also ensure the canola price is very responsive to production shocks, with the market especially driven by the status of the South American soybean crop and the availability of exports.” Cargill canola trader Katie Colvin said current prices were hovering between $540/t and $545/t port, with the price remaining relatively constant throughout the Australian harvest. She said the estimate for new crop was at around $500/t, but this was more an indicative figure, rather than one attracting genuine interest. “People are totally focused on getting this year’s crop off and marketing it.” Ms Colvin said much of the pricing direction over the next couple of months would come from the condition of the South American soybean crop. “We’re monitoring conditions in Argentina and Brazil closely.” Mr Chong said farmers would like to see subsoil moisture levels replenished before confidently going in with canola, which traditionally has higher moisture requirements than cereal crops. “Without significant rains before the critical decision-making period in March/April, farmers will likely look towards planting wheat and barley in favour of canola,” he says. Over the medium term, Mr Chong said he felt Australia was well placed to meet increased demand for oilseeds, especially into Asia. “The biggest driver of the oilseed market is the increasing demand for edible oils. This is what we are seeing in developing economies, as incomes rise and their affordability for a higher calorie diet increases,” Mr Chong says. “Much of this demand will be driven by emerging economies in Asia – the geographical proximity to these markets poses opportunities for Australian canola.”

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