Shujia (Charlie) Qin

Key points
- Record value of canola production in 2021–22, reaching $5.8 billion.
- Value of canola production to fall in 2022–23, though still second highest on record.
- Canola prices are forecast to remain high, gradually easing due to recovering world supply of canola.
- Australian canola production forecast to be lower over medium term, remaining similar to historical averages.
Record production and prices supported the gross value of canola production to hit record levels in 2021–22, reaching $6.3 billion (Figure 1.1). Record production reflects very favourable Australian seasonal conditions, while record prices are driven by tight global supply. This is almost four times the value of production in 2018–19, and 2019–20.
In 2022–23, the gross value of canola production is forecast to fall to $3.5 billion, which will be the second highest on record. The fall from 2021–22 levels is driven by prices and production both falling from record levels. The canola price is expected to be the second highest price on record, due to tight world supply of canola, despite global production returning to normal levels in 2022–23. However, if disruptions to fertiliser and energy markets were to continue into 2022–23, the value of canola production in 2022–23 is likely to be to be higher due to elevated canola prices. This edition of the Agricultural Commodities Report considers two scenarios over the outlook period to 2026–27 (see the Agricultural overview for a full explanation).
Over the medium term to 2026–27, the gross value of Australian canola production is expected to be significantly lower, primarily due to prices falling to long-term averages. The canola price is expected to decrease gradually over this period as the world canola supply continues to increase. Due to market uncertainty, supply chain disruptions and elevated fertiliser prices, canola prices are expected to decrease at a slower pace under the 'slower recovery' scenario. Falling prices result in the value of canola production averaging around $2 billion between 2023–24 to 2026–27 and rising over this period, under either scenario.

f ABARES forecast. z ABARES projection.
Sources: ABARES; ABS
The value of canola exports increased 133% to $5.1 billion in 2021–22, reaching record levels. This is more than double the highest recorded value of exports before 2020–21 and is 223% higher than the 10-year average. In 2022–23, the value of canola exports is forecast to be the second highest on record, reaching $3.1 billion. Record levels of canola exports during 2021–22 and 2022–23 reflect high production alongside tight global canola supply driving up prices. The value of canola exports is projected to follow a similar trajectory to the gross value of production under the faster and slower recovery scenarios.
Canola prices are forecast to remain high in 2022–23, gradually easing over the medium term due to recovering world supply of canola. The Australian (Kwinana) canola price is forecast to be $772 per tonne in 2022–23, down from the record high of $925 per tonne expected in 2021–22 (Figure 1.2). This is driven by significantly higher canola supply as Canadian canola production recovers following drought conditions in 2021–22. The Canadian canola price is expected to be US$604 per tonne in 2022–23, down from US$811 in 2021–22. Prices could average higher under the slower recovery scenario due to a lower growth in global production stemming from elevated fertiliser prices.

f ABARES forecast.
Sources: International Grains Council
Over the medium term to 2026–27, the Australian canola price is expected to gradually decrease as world supply of canola continues to increase. The recovery of world canola supply is expected to be slower under the slower recovery scenario, primarily due to higher fertiliser prices which incentivise rationing fertiliser, reducing yields. As a result, the Australian canola price is expected to decrease at a slower pace under the slower recovery scenario.
Soybean prices currently high and forecast to decrease
Soybean prices are forecast to gradually decrease due to growth in world soybean production outpacing demand. Currently, the world soybean price is elevated and expected to average US$546 per tonne in 2021–22. This is due to recent dry conditions in South America which have reduced world supply. In 2022–23, the soybean price is forecast to decrease to US$490 per tonne due to higher soybean production. Over the medium term, growth in world soybean production is expected to cause soybean prices to decrease further.
Australian canola production is forecast to be 4.9 million tonnes in 2022–23, which is 32% above the 10‑year average. This is driven by increased planted area in response to high prices. Yield is also forecast to be above average due to soil moisture levels and the positive rainfall outlook for the autumn planting season. Australian canola exports are also expected to be high, reaching 4 million tonnes in 2022–23. This is a significant decrease relative to 2021–22 due to the expected absence of La Niña conditions supporting production for the majority of the season.
Over the medium term to 2026–27, Australian canola production is projected to decrease further to be a similar level to the 10-year average to 2020–21. Although high canola prices are expected to support area planted for canola, substantial fluctuation in area is still anticipated due to changing seasonal conditions. The timing of drought like conditions are expected to significantly reduce production when they occur, with for example, production falling sharply in 2023–24 and gradually recovering over subsequent years under the faster recovery scenario. A drought occurring later in the outlook period would lead to the same pace recovery in production as seen under the faster recovery scenario.
Currently, world supply of canola is tight due to global production decreasing 4% to 71 million tonnes in 2021–22 (Figure 1.3). This was driven by Canadian canola production which experienced drought conditions and decreased 35% to 13 million tonnes. World canola stocks are also at significantly reduced levels, reaching the lowest level in 18 years in 2021–22. In 2022–23, global canola production is expected to rebound to 76 million tonnes due to a return to normal growing conditions and yields across major producing regions. Despite high world prices for canola, not all regions are expected to increase area planted for canola. Notably, Agriculture and Agri-Food Canada’s January 2022 Outlook has forecast Canadian canola area to decrease 3% in 2022–23 as farmers shift to other cereal crops including wheat. This is expected to offset higher canola planted area in other regions including Australia and the European Union. Overall, world area planted in 2022–23 is expected to increase by 2% relative to 2021–22.

f ABARES forecast. z ABARES projection.
Source: ABARES; Agriculture and Agri-Food Canada; European Commission; United States Department of Agriculture
Over the medium term to 2026–27, world supply of canola is expected to gradually recover. Normal growing conditions across most major producing regions are assumed to facilitate high and stable levels of global canola production over this period. This is anticipated to support world canola stocks to continue improving. The recovery of world canola supply will in part be determined by the outlook for world fertiliser prices. As a relatively fertiliser intensive crop, recovery of world supply will be delayed if fertiliser prices remain high (slower recovery scenario).
Global supply of soybeans supported by growing soybean production
Strong growth in global soybean production is expected to support world supply of soybeans to recover. Global soybean production in 2021–22 has been revised 5% downward to 364 million tonnes since the Agricultural Commodities: December quarter 2021. This is due to recent dry conditions in key producing regions including Brazil and Argentina. In 2022–23, global soybean production is forecast to recover, increasing 7% to 389 million tonnes. This increase is driven by higher soybean area planted in response to current high prices. Over the medium term, global soybean production is forecast to maintain stable growth. The slower recovery scenario is expected to have limited impact on global soybean production as soybeans require relatively less fertiliser than other crops such as canola.
Demand for vegetable oil is supported by recovering biodiesel consumption and stable growth in food consumption of vegetable oil. Recovering biodiesel fuel consumption reflects increasing demand for transport fuels due to easing transport restrictions and the continuing global recovery. Notably, vegetable oil prices have seen a strong upward trajectory alongside the crude oil price over 2021 (Figure 1.4). The December 2021 Resources and Energy Quarterly forecast the crude oil price to remain high and average US$73 per barrel over 2022. Importantly, this forecast anticipates global fuel consumption will remain on an upward trajectory in 2022.

Source: International Grains Council; US Energy Information Administration
Over the medium term, demand for vegetable oil will be influenced by biodiesel policies. Recent EU renewable energy policy is anticipated to continue to support biodiesel demand for some oilseeds including canola, while demand for palm oil is expected to decrease (see opportunities and challenges section).
Global protein meal demand influenced by China’s meat production
A key driver of global protein meal demand includes changes in China’s meat production. China’s pig production has improved substantially following the containment of the spread of African Swine Fever and efforts to rebuild the pig herd. Higher pig production was enabled by increased protein meal production. Notably, China’s protein meal production is reliant upon imports which have supplied 85% of China’s soybeans over the past decade. China’s protein meal production is expected to continue growing in the medium term, but at a slower pace. This is due to recent policy announcements which target stable meat production at close to pre-ASF levels.
EU renewable energy regulation to support biodiesel demand for canola
Recent EU renewable energy policy will influence demand for biofuels including biodiesel. The 2021–2031 EU Agricultural Outlook highlights the anticipated impact of regulations which classify biofuels based on indirect land use change (ILUC) criteria. The outlook forecasts rapeseed (canola) oil use for biodiesel to remain at similar levels. In contrast, the outlook points out that palm oil for biodiesel use is expected to decrease due to difficulties obtaining required ILUC certification. Notably, the EU is Australia’s primary export market for canola and is estimated to make up 85% of global biodiesel demand for canola oil over the past decade. Strong EU demand supports Australian canola exports.
High fertiliser prices to be costly for canola production
High fertiliser prices are expected to increase input costs for production of canola, which is a relatively fertiliser intensive crop. GRDC Grow Notes estimates that canola requires higher levels of major nutrients including nitrogen, potassium and sulphur per tonne of grain, compared with cereals such as wheat and barley. On a per hectare basis, canola’s nutritional requirements are more similar because canola yield is usually lower than wheat and barley. Farmers may adapt to high fertiliser costs by employing strategies such as rationing fertiliser, leading to reduced crop yields.
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