Oilseeds

GVP $844 million est. Up 527% yoy.
Production increased significantly supported by bigger plantings and record high yields for canola.
Prices were volatile during the year but ended up strongly which will support plantings for 2021-22.

Oilseed production rebounded strongly with better seasonable conditions. Low global canola stocks and reduced production in key competitor countries such as Canada and France supported prices, though price volatility during the year meant not all producers were able to access the best prices.⁴

NSW growers on disease alert this year

Speaking at the Grains Research and Development Corporation (GRDC) Grains Research Update in Wagga Wagga, NSW Department of Primary Industries Senior Plant Pathologist Kurt Lindbeck encouraged growers to weigh up the risks for 2021 crops and alter paddock selection, crop choice and fungicide programs where necessary.

“In the last 20 years, grains production in southern NSW has changed significantly with many producers moving entirely into grain, removing livestock and pastures from their farming system, and altering agronomic practices to include stubble retention, minimum tillage and different crop sequences,” NSW Department of Primary Industries Senior Plant Pathologist Dr Kurt Lindbeck said.

“These changes have increased the disease burden across the farming system and disease management has become an important and annual consideration for many grain producers.

Media release

Ban on GM crops no more

July 1 marked an historic new opportunity for the state’s farmers to increase their competitiveness and productivity, as the NSW Government lifts its ban on the use of Genetically Modified (GM) crops. Minister for Agriculture Adam Marshall announced the lapse of the 18-year moratorium and said it would not be renewed, opening the door for the state’s primary industries sector to embrace new GM technologies. “By lifting the ban we hope to unlock the potential of GM crops for our state’s growers, delivering better yields with less inputs such as pesticides, and growing more nutritious produce,” Mr Marshall said.

Media Release

Production

Oilseed production rebounded significantly in 2020-21, up 395% to 1.99 million tonnes ⁴, well above the 10-year average. Area planted to oilseeds was up 114% and with excellent seasonal conditions, higher yields further supported production.⁴ Canola and cottonseed (as a byproduct of cotton) dominate oilseed production in NSW.

Growth was strongest for canola. Area planted to canola remained below 10-year averages however record high yields pushed up canola production to 1.4 million tonnes, 47% ahead of the 10-year average.⁴

Cottonseed also delivered strong growth from very low, drought impacted levels in previous years. Whilst area planted to cotton was up 253%, it remained 20% below the 10-year average despite improved condition as water storages remained low in some areas.⁴ Overall production of cottonseed rose 363%.⁴

NSW oilseed production ('000 tonnes)

Canola
Cottonseed
Soybeans
Sunflower
10 Year Average

Download data (.XLSX)

Source: ABARES (2021)

NSW Canola Yields (tonnes/hectare)

NSW Canola Yields (tonnes/hectare)

Download data (.XLSX)

Source: ABARES (2021)

Price

Canola pricing was volatile during the year. Prices initially fell, responding to increased production and relative to prices which have been elevated over the last 2 years due to drought. Export demand and crop size once again became the major drivers of price rather than domestic crushers seeking to maintain at least some supply to their facilities. COVID also likely impacted early season demand for canola for biofuel. However, as the year progressed prices improved materially, despite an increase in the value of the $A. Dry conditions in France and Canada (two of the largest sources of supply of canola) raised concerns about the size of production in both countries. Low global stocks and increased buying from China of grains generally also supported prices. Prices increased significantly in the last quarter of the year. Despite a higher end of year price, average canola prices are estimated to have fallen 2.8% during the year ⁸¹ though prices remained above the 5-year average.

Cottonseed pricing fell during the year as a result of lower feed demand and increased supply. Cottonseed prices are estimated to have fallen 40% during 2020-21.²⁹

Canola prices ($A/tonne) - Port Kembla

Canola - Port Kembla
5 year average price

Download data (.XLSX)

Source: DPI (2021)

Trade

The majority of NSW canola is sold to domestic facilities for crushing into oil and meal. When production is large enough (as in 2020-21) NSW does export canola, primarily to the EU, however the majority of Australia’s exports are from Western Australia. As a result of drought, NSW exports of canola have been very small in recent years however, in 2020-21, exports surged to $449 million ¹²⁸ the highest since 2013. Australian domestic canola crush (which is mostly on the eastern seaboard) has been stable at around 800,000 tonnes in recent years, reflecting stable domestic demand. However, the strong harvest and high international prices for oil encouraged processors to stretch this capacity to almost 1 million tonnes in 2020-21.²¹⁰ This meant some canola oil was also ultimately exported. State level export data has been restricted since 2014-15, however national canola oil exports rose to 33% to $296 million.¹²⁸ Prior to data being restricted approximately 38% of national canola oil exports were from NSW. Cottonseed exports also rebounded from very low levels during recent drought years to $4.9 million in 2020-21 ¹²⁸ but remain well below peak exports.

Macroeconomic Conditions

The core drivers of demand for oilseeds are demand for vegetable oils, demand for biofuel and demand for livestock feed. Global demand for vegetable oils generally remains reasonably stable, increasing gradually in line with increased demand from Asian markets. This stability was highlighted even during the COVID-19 pandemic. Demand for biofuels is more closely linked to economic conditions, especially in Europe which typically sources Australian canola for biofuel production. As economic conditions improved following the initial shock from the pandemic, demand from this source improved. Chinese feed demand also improved as the pig herd rebuilt from African Swine Fever. The increased demand as the year progressed highlighted low stock levels for canola in Europe and Canada and for soybeans in the United States ¹⁹⁴ Despite increased soybean production, concerns around low stock levels were exacerbated by lower than expected production in Europe and Canada. This created some volatility for canola prices during the year but should also support prices in the short term.

Outlook

The short-term outlook for oilseeds is very positive. Production declines in Canada (a key competitor for canola) and low stock to use levels for oilseeds in general is expected to support prices. As China continues to rebuild its pig herd following African Swine Fever demand for protein meal will remain robust. A continuation of the global economic recovery should also support demand for canola for production of biofuel, especially in Europe. European domestic canola production is also likely to be down and, with Canadian canola now priced at a premium, this should support Australian canola’s competitive position in supplying canola for European biofuel. Futures pricing for new season canola indicates significantly better prices for canola producers in 2021-22. The positive price outlook and a reasonable seasonal outlook is expected to support canola plantings in 2021-22.

Likewise, improved water availability will support cotton plantings which will increase cottonseed production, possibly significantly given 2020-21 plantings were partly impeded by water availability. The price for cottonseed will likely fall given higher production though continued livestock feed demand from China will provide some buffer.

Over the medium term, demand will continue to grow, supported by growth in Asian markets, feed demand in China and a continued economic recovery. However, supply is also expected to recover in Europe and Canada (canola) and the United States (soybeans) and this will likely result in prices falling from current very high levels, though low current end stocks for oilseeds will provide some buffer.

Oilseed meal imports

An important by-product of crushing oilseeds is meal, used for feeding livestock; dairy, pork, poultry and cattle. The resulting meal is high in protein and energy. Cottonseed is also used as important feedstock, both fed directly and as a meal by-product from crushing (though NSW’s only cottonseed crushing plant closed during the drought so there is little meal currently produced). With increasing meat consumption demand for oilseed meal is rising. However, as crushing facilities primary focus is the production of vegetable oils, the amount of meal produced each year is partly limited by domestic demand for oil. This means that livestock demand for oilseed meal has been met by rising imports of soybean meal – primarily from Argentina. Imports of soybean meal have typically exceeded $450 million in recent years.¹²⁸