An 'abnormal' rise in European biodiesel imports is eroding demand for canola and rapeseed and Australian farmers are feeling this in the hip pocket.
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Complex biofuel policies have become a major component of world oilseed demand in recent years and these policies are increasingly driving oilseed trade flows. More than half of Australia's annual canola exports are shipped to the European Union where it can earn a premium if it meets strict eligibility requirements to ensure it has been sustainably produced.
The EU has encouraged biodiesel production made with waste oils and fats for renewable energy production.
Europe's biodiesel imports, mostly from China, have surged in 2022-23 which has hit demand for rapeseed oil. Last week European rapeseed oil prices fell to a three-year low and are down 30 per cent in the past five months, leading to similar declines in canola and rapeseed prices.
Last week, European vegetable industry group FEDIOL said the rise in biodiesel imports classified as waste-based, often coming from used cooking oil, was 'abnormal' and called for an investigation into the authenticity of the claims of these biofuel imports.
Biodiesel imports made from waste-based products are also subject to strict eligibility requirements to meet the import criteria established by the EU.
Australian canola prices have been under constant pressure in recent months under the weight of a record large harvest and slowing demand from European importers. Prices have tumbled by around $200 a tonne since late February to less than $600 port.
Around 3.4 million tonnes of canola have been exported from Australia in the period from October 2022 to March 2023. About 70pc has been shipped to Europe.
Canola plantings in Australia are tipped to be well down on last year's levels as farmers react to the softer price outlook. WA's GIWA forecast that canola plantings are expected to contract by 18pc from last year with the weaker prices as well as the drier seasonal weather outlook.
Canola plantings are also expected to contract in other states.
Domestic grain prices in Australia continued to firm last week on the back of the concerns for a dry winter.
Northern barley values continue to hover around $430-435 delivered into the Darling Downs. Stockfeed wheat bids into Melbourne and surrounding regions were $5-7 higher as feeders chase supplies for the second half of the year.
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