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Canola markets - rising risks |
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Over the three years leading up to the 2005-06 crop year canola supplies doubled with increases in both output and ending stocks. Over the same period prices declined by a third. When last spring the seeded area was again large - only slightly reduced from the previous year and almost certainly encouraged by rapidly growing sales rather than prices, prospects were at best uncertain. Continued growth in demand both for canola and its products, and for grains and oilseeds generally, have not only resulted in inroads being made into ending stocks, but this has occurred at higher prices. While generally prospects for canola and product sales, particularly canola oil into the US market, have improved, there were two elements on the demand side that are unlikely to make as positive a contribution next year as they have this. Adjustments in the tax treatment of bio diesel in Germany has already taken the bloom off related EU demand for Canadian canola oil. The Australian drought has virtually eliminated the major competition in the international market place but only until its 2007 canola harvest. Together these two factors have the potential for reducing export potential by close to a million tonnes, with almost half of that kicking immediately and the other half after the Australian harvest in the late fall, if and when Australian output recovers. Farmers would be well advised to consider alternatives to canola favourably, unless they expect the Australia drought to persist and the political winds in Germany to change direction favouring bio diesel again as it did until quite recently. David Walker This is a summary of a substantial canola situation and outlook report. Contact the author at davidw@openi.co.uk, for further information. top of pageMaintained by:David Walker . Copyright © 2007 David Walker. Copyright & Disclaimer Information. Last Revised/Reviewed: 070322 |