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Oilseeds

GVP $1,568 million est. Up 70% year-on-year.
Production increased significantly supported by an increase in plantings and record high yields for canola.
Prices also reached record highs and combined with high production meant NSW GVP from oilseeds exceeded the previous record high by a significant margin.

2022 was a breakout year for oilseed producers as a result of record high production combined with record high prices. Production continued to grow as seasonal conditions remained supportive producing higher than average yields and high prices encouraged a significant increase in area planted.

Production

Oilseed production continued to rebound from lows in 2019-20. A combination of excellent seasonal conditions, high oilseed prices and significantly improved water allocations for cotton farmers resulted in a 49% year on year increase in area planted to oilseed, the second highest on record.²⁰¹

Yields for most oilseeds remained close to record levels, especially for canola.

Cottonseed (which is a byproduct of cotton) yields were below historical highs however, this was primarily the result of improved varieties and growing techniques for cotton which have reduced the ratio of cotton seed to cotton lint.

As a result, overall production was up 41% year-on-year and 65% above the 10-year average. The standout was canola with record high production, up 17% year-on-year and 75% above the 10-year average.²⁰¹

NSW area planted to oilseeds ('000 Ha)²⁰¹

Canola
Cottonseed
Soybeans
Sunflower
10 year average

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NSW Oilseed Production ('000 tonnes)²⁰¹

Canola
Cottonseed
Soybeans
Sunflower
10 year average

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Price

Canola prices were very strong for all of 2021-22. Average prices are estimated to have risen 46% year-on-year and, importantly, up 49% for the key December to March selling period for farmers.²⁴⁵

Canola prices have been elevated since late 2020-21 primarily due to drought in Canada which has significantly impacted production. Canada is typically responsible for 60% of global exports of canola/rapeseed. The Russian invasion of the Ukraine (responsible for another 10% to 20% of exports) further impacted global supply. Whilst prices in Australia were excellent and well above average, domestic prices were below global averages as exporters struggled to move a record grain harvest through ports. Comparative international prices are also inflated by domestic factors in other producer countries, especially Canada. Canada has a large canola processing sector which needed to compete for significantly reduced supply as a result of drought.

Canola price (Delivered Port Kembla, $AUD per tonne)²⁴⁵

Canola - Port Kembla
5 year average price

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Domestic factors also regularly influence NSW canola prices, and it is more typical that farmers receive a small premium to international prices, with a significant premium when Australia was also in drought in 2018-2020.²⁴⁵¹⁰¹ Nevertheless, the unique combination of record high domestic production and significant supply disruptions in Canada meant the difference between Australian and Canadian prices reached record highs.²⁴⁵¹⁰¹

Cottonseed prices are estimated to have increased 3.7% during the year.¹¹³ Prices did rise strongly in the middle of the year as stocks ran low but eased again as the size of the 2021-22 harvest became apparent. With no crushing capacity for cottonseed in NSW, all cottonseed is either used as stock feed domestically or exported.

Canola delivered Port Kembla vs canola delivered FOB, Saskatchewan Canada²⁴⁵¹⁰¹

Basis - Cash Port Kembla to ICE Futures

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Cottonseed price ($/tonne)¹¹³

Cottonseed price

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Trade

NSW exports of oilseeds (which are 95% canola) increased 124% year-on-year to $1 billion.³⁵ This is a record high as the majority of NSW canola is usually sold to domestic facilities for crushing into oil and meal. Approximately 82% of exports were to the European Union for use as biofuel.³⁵ Over 65% of total exports were to Germany and Belgium.³⁵

Australian exports of canola (primarily from Western Australia) also surged 170% to a record high of $4.9 billion.³⁵ With domestic crushers increasing capacity to handle the record crop, exports of canola oil also increased. Whilst information on state level exports of canola oil are restricted, national exports increased 32% to $372 million.³⁵ DPI estimates that 35% to 40% of these exports are from NSW. NSW cottonseed exports also rebounded strongly to $38 million in 2020-21³⁵ in line with the 10-year average.

NSW Oilseed exports by destination ($'million)³⁵

European Union
Asia
Middle East
Americas
Other

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Macroeconomic Conditions

The versatility of oilseeds, which can be used as cooking oil, biofuel or stock feed has created multiple markets, both domestically and for export. Production difficulties in key competitor countries, especially Canada, continued to support demand for Australian oilseeds. Russia’s invasion of Ukraine has created further uncertainty around supply and pushed prices to record highs. The supply concerns are creating some uncertainty for markets and prompting some government reactions. With low global stocks for vegetable oils generally, Indonesia, which is one of the largest global suppliers of palm oil, a substitute for canola oil, banned exports for several months highlighting global concerns around supply. In response to rising food prices, Germany, which buys significant quantities of Australian canola to meet biofuel mandates, is considering reducing the level of crop-based biofuels to ease the pressure on food prices.

Outlook

The short-term outlook for oilseeds is reasonably uncertain. Canola is a high input crop and, with the cost of fertilizer and fuel increasing significantly, some producers may judge the risk of planting canola as high. Countering high input costs however is a continuation of supportive seasonal conditions and high futures pricing for canola at the time of planting which provided strong incentives to increase area planted. High prices have also encouraged an increase in expected production internationally and, with a recovery in seasonal conditions in France and Canada, global production is likely to increase significantly. These factors will likely weigh on prices in the short term. However, low global stocks and high crude oil prices should provide support for prices at above recent averages, albeit lower than the highs experienced in 2021-22. Likewise, high cotton prices and excellent water availability are expected to support an increase in cottonseed production.

Stronger Primary Industries Strategy

First soybean variety for NSW with resistance to soybean leaf rust

Soybean growers will benefit from the first soybean variety bred for NSW with resistance to soybean leaf rust (Phakopsora pachyrhizi), boosting grower’s productivity and profitability.

Strategic Outcome

Economic Growth

Soybean leaf rust is a major concern for growers as the disease can rapidly move up the canopy, destroying the leaf and preventing grain from filling, which results in a reduced yield, seed size and quality.

A 2019 analysis, based on an edible grain price of $700 per tonne and a severe rust event occurring once every four seasons, estimated that the income benefit for soybean growers in choosing a rust resistant variety is worth around $2,500 per hectare.

Breeding and evaluating varieties of soybean to suit the wide variety of climates and farming systems in Australia is the focus of the Australian National Soybean Breeding Program, a collaboration between NSW Department of Primary Industries (DPI), CSIRO and Grains Research and Development Corporation.

The new variety, released in early 2022 named ‘Gwydir’ is high yielding, rust resistant and has improved weathering tolerance, providing greater crop security.