Oilseeds

GVP $1.3 billion est. Down 28% year-on-year.
Domestic oilseed prices softened, down from the unprecedented highs of 2021-22.
NSW exports reached a new record volume with biofuel policy a key driver of global oilseed demand.

The value of NSW oilseed production in 2022-23 was estimated at $1.3 billion, down 28% on the previous record-breaking crop of 2021-22. Total production of oilseeds reached 2,744 tonnes, falling short of the previous year’s record by 13%, although still up 60% on the 10-year state average production. Canola and cottonseed continue to be the dominant oilseed crops in NSW.

Production

Despite high prices and good soil moisture levels at planting, canola seeding was down 4% year-on-year to 900,000ha.¹ What began as timely autumn break for most, continued to develop into an exceptionally wet sowing season in key growing areas of the Central West and Southern NSW, where saturated soils prevented access to many paddocks for planting and waterlogging restricted establishment in others. Additionally, industry reports indicated that canola seed availability was also an issue, with demand exceeding supply in many areas of southern Australia, particularly for favoured hybrid varieties.¹⁴¹¹⁴² With demand for canola seed rising considerably over recent years due to strong market growth and good seasonal conditions, this has resulted in some producers having difficulty accessing seed or experiencing delayed delivery of first choice seed supplies during the 2022-23 planting window.

Wet conditions bookended the canola growing season, separated by a relatively dry June and July in most regions.¹⁴⁰ The majority of canola crops generally withstood the wet conditions reasonably well however, some crop damage and losses due to flooding was experienced in lower-lying areas of the Central West and Riverina-Murray regions toward the end of the season. Harvest was also challenging on heavier soils with waterlogged paddocks restricting access the more direct heading of crops that would otherwise have been windrowed. The wet conditions brought with it a larger than normal occurrence of mouldy seed and in response to the volume of weather-impacted canola, the Australian Oilseeds Federation introduced an additional 2022-23 seasonal standard which had a higher tolerance for seed with the appearance of mould.¹³⁹

Despite these challenges, the total state volume of production was not as severely impacted as originally anticipated, with yields remaining well above the decade average, and oil and test weights well within the average range.¹⁴⁴ In total, 1.8 million tonnes of canola was produced, down 15% year-on-year however historically, still the 4th highest on record.¹

Sunflower seed was the standout growth crop in 2022-23, with production up 135% on the 10-year average to 32 thousand tonnes – the largest crop since 2010-11.¹ While domestic sunflower seed demand has been largely currently confined to use for birdseed, horse feed and specialist human-consumption markets, there has been renewed interest in growing sunflowers since the outbreak of the Ukraine war for domestic oil production.¹⁴⁵ However, crushing capacity for non-canola remains limited despite interest from several smaller NSW-based crushers. Australia is currently reliant on imported sunflower seed oil, importing on average 60,000t per annum.³⁵

The total area planted to soybeans decreased and production was down 18% year-on-year to 28 thousand tonnes.¹ Cottonseed production was also down 12% year-on-year to 884 thousand tonnes due to decreased cotton lint production off the back of a highly rain disrupted and extended planting period and down from the record 2021-22 cotton crop.¹

Price

Domestic oilseed prices softened, down from the unprecedented highs of 2021-22, pressured by ample global supply and easing disruptions to global trade. Early in the 2022-23-year, the weight of increased supply from the northern hemisphere harvest reduced global benchmark futures prices and saw the domestic cash price fall by $50/tonne from the end of June to the end of September 2022.¹²² Prices found some support during the early months of 2023 upon drought concerns surrounding the Argentinian soybean crop, however these concerns were short-lived upon news of a likely record Brazilian soybean crop.

Overall, domestic canola cash prices fell by over a third from their peak in May 2022 of near $1,037/t (delivered Port Kembla) to their lowest point of $587/t in March 2023.¹²² Global benchmark futures prices also decreased 35% over the same period.¹⁶⁵ Despite the price pressures, continuing strong global biofuel demand and the ongoing uncertainties surrounding the Ukraine’s production and trade capabilities, provided a decent floor for prices. Average canola prices for 2022-23 remained well above the longer-term average at $797 (delivered Port Kembla), 36% above the 5-year average to June 2021.¹²²

Trade and Macroeconomic Conditions

NSW oilseed exports surged again, reaching a new record volume and for the first time, over 1 million tonnes, up 9% year-on-year.³⁵ The total value of NSW oilseed exports decreased year-on-year to $866 million due to lower export prices.³⁵ Canola exports continued to dominate (78% by volume and 85% by value) however, the main driver of change in volume terms was cottonseed exports, up 199% year-on-year, reflective of the larger 2021-22 cotton crop, and contributing to just over 20% of the total 2022-23 NSW oilseed export program by volume.³⁵

Biofuel policy continued to be a major driver of global oilseed demand. The EU, the US and Brazil are three of the largest consumers of biofuel however, more than 60 countries have biofuel mixing requirements and policies which are a key driver of biofuel consumption and demand. Whilst typically, the majority of NSW canola is sold to domestic facilities for crushing into oil and meal, strong growth for renewable fuels again offered a great opportunity for NSW canola exports during 2022-23.

Australia continues to have a competitive advantage over many other canola-producing nations due to the relatively low GHG emissions intensity of canola production and cultivation of non-GM varieties.¹⁴⁶ Even though the primary use of Australian canola in the EU is for the biodiesel market, importer preference is for non-GM canola which enables the meal by-product to be used in their livestock industries.

The peak average canola price realised over 2021-22 coincided with low world ending stocks. Global stocks had recovered by the close of 2022-23, supported by a 3% year-on-year increase in global oilseed production. The higher production was driven by expected higher soybean production in Brazil and higher canola production in Canada, the EU and Australia, larger sunflower crops in Argentina and larger cottonseed production. These increases offset reduced sunflower seed production in the Ukraine and the EU. Global 2022-23 oilseed production was estimated at nearly 631 MMT.¹²⁴

Global Biodiesel Feedstock Crops¹⁶⁸

Canola Oil
Soybean Oil
Palm Oil
Used cooking oil
Other

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Canola Price and Global Opening Stocks¹²²¹⁶⁵¹⁶⁶

Canola (del. Port Kembla)
CME Futures
World ending stocks (RHS)

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Australian crushing capacity, meal and oil production, and exports

Cargill processes over 680,000 tonnes of canola, cottonseed, sunflower seed and soybeans annually in Australia to produce protein meal for animal feed and vegetable oil for foods such as margarine, salad dressings and frying. In April 2023, Cargill announced an investment of US$50 million (A$73m) to upgrade and expand its Newcastle, Narrabri and Footscray oilseed crush facilities to cater for rising demand from customers for canola and cottonseed products and provide Australian farmers with further access to global markets.¹¹⁰ Whilst these upgrades will further enhance Eastern Australia’s existing canola crushing capacity, it will also provide for the re-establishment of cottonseed crushing facilities, facilitating the production of cottonseed hulls for feedstock, cottonseed meal, and oil. Crushing capacity may also be further boosted in the future by the recent merger between the US gains merchant Bunge and Glencore-backed Viterra in mid-2023.

Industry sources indicate that total national combined oilseed crushing capacity is around 1.2 MMT.¹⁶⁷ National canola crush volumes have been relatively stable for several years at around 800,000 MT, as domestic cooking oil consumption is reasonably stagnant and increases only with population growth.¹⁶⁷ However, in 2022-23, canola meal and oil production was estimated to be at capacity due to crushers taking advantage of consecutive record canola crops and very strong canola oil export prices, which increased 128% above the previous 5-year average since late 2020.³⁵

Consequently, Australian exports of canola oil hit record highs over the past few years. Key export destinations by volume included China, Taiwan and New Zealand.

Australian Canola Oil Exports³⁵

Price/tonne
Tonnes (RHS)

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Outlook

The forecast is for another decline in the canola area being planted in NSW, estimated at 840 thousand hectares, with production forecast to follow suit with a 39% decline year-on-year.¹. Despite the drier conditions, canola seemed to be fairing much better than most cereal crops with the majority of the NSW crop sown earlier into soils with a good residual soil moisture profile. The drying conditions resulted in an earlier finish to the growing season and windrowing commenced earlier than usual, with early indications suggesting that yields remain above average, despite the less-than-ideal seasonal conditions.¹¹⁵ Global oilseed demand is expected to increase slightly in 2023-24, driven by expanding biodiesel mandates and will likely result in an increase to the premium of vegetable oils over protein meals.¹¹⁶

Stronger Primary Industries Strategy

National Soybean Breeding Program

Strategic Outcome

Economic Growth

2.5 Partner for productive, efficient and resilient food and fibre supply

New soybean variety sows the seeds for better crop security

A new variety of soybean developed in NSW will significantly boost productivity and profitability for growers across the state, locking in crop security and helping to meet the projected global demand for diverse protein supplies. Bred as part of the ongoing Australian National Soybean Breeding Program, a collaboration between NSW DPI, CSIRO and Grains Research and Development Corporation, Gwydir is the first variety in NSW that is resistant to soybean leaf rust (Phakopsora pachyrhizi). An airborne fungal disease spread by tiny spores, soybean leaf rust thrives in wet conditions and rapidly progresses towards the canopy of the plant where it destroys the green leaves and prevents the grain from filling the pods, resulting in substantially reduced yield and crop quality.

A 2019 analysis, based on an edible grain price of $700 per tonne with severe soybean leaf rust occurring every four seasons, estimated the resulting income benefit for soybean producers sowing and harvesting a rust resistant variety was around $2,500 per hectare. The higher-yielding and early-maturing variety is well suited to different climates, particularly to an early sowing window on the northern NSW production regions including the North Coast, Northern Tablelands, Northern Slopes and Liverpool Plains.

Gwydir’s improved weather tolerance will help growers to maintain edible market quality and price in environments that experience heavy rainfall at harvest time. Its narrow leaf allows better spray penetration and more light deep into the canopy, where it can stimulate pod-set after flowering. With its high protein content, Gwydir is suitable for high-value edible markets for export and domestic consumption, meeting the growing demand for plant-based foods.