Canola at a high point but no supercycle

Canola at a high point but no supercycle

Grain
Canola crops are in healthy condition through much of Australia, raising a mouth-watering prospect if the current yield potential comes to fruition.

Canola crops are in healthy condition through much of Australia, raising a mouth-watering prospect if the current yield potential comes to fruition.

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Canola values are capturing the headlines but the values are due to temporary supply and demand issues, not a supercycle.

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CANOLA prices have broken records with monotonous regularity this year with farmers now looking at the real possibility of prices in excess of $800 a tonne at harvest, 25 per cent above the previous highest values at the business end of the season.

However, canola industry insiders have warned that while there are great short-term opportunities, especially when the high prices are married up with the potentially good yields on offer this year, the current scenario does not represent a quantum shift in canola demand.

"The prices at present are fantastic, there's no doubt, but we're also conscious that it will not necessarily always be that way," said Nick Goddard, executive director of the Australian Oilseeds Federation.

"A lot of the demand at present is coming from the EU for use to make biofuel as part of the mandate there," Mr Goddard said.

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"If policies were to change we could see that demand drop, so while things are fantastic at present we don't want to get too carried away," he said.

"There is no guarantee that the EU will continue to view biofuel as the most sustainable method of powering vehicles into the future, already there is a lot of work on electric vehicles and that may have an influence on demand for biodiesel."

Brett Hosking, GrainGrowers chairman, agreed.

"The EU mandates have been a really big part of what has sent canola values up so sharply," Mr Hosking said.

"If things were to change, either the EU requiring a different type of accreditation or maybe even moving past biofuel then we would be left focusing on human consumption markets, which are great but you would not have the options we have today," he said.

Canola prices have soared due to a downturn in EU production due to a lack of suitable insecticides following the banning of neo-nicotinoid products and this year's drought in Canada, the world's major canola exporter.

Australian producers can get $830 a tonne delivered port and some analysts see further upside in the market.

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