What’s driving world oilseed markets? Who are the players, and where does Canadian canola fit in? To consider this, I’ll focus on soya beans rather than oil or meal, to provide a simple comparison to bulk canola. I’ll start with world soya bean exporters and importers, then compare soya beans to canola.
Global exports of soya beans totalled approximately 130 million metric tons (mmt), or US$59.4 billion in 2018. (All of the dollar values in this article are in U.S. dollars.)
Of these exports, 64 per cent came from Latin America ($37.4 billion). North American exporters were in second place (32.7 per cent), with exports of $19.4 billion.
Since 2014, the exporters growing in importance have been Russia (up 1,132 per cent since 2014), France (up 243.7 per cent), Romania (up 110.9 per cent) and Germany (up 77.8 per cent).
Countries posting declines in soya beans exports were: Uruguay (down 67 per cent), Argentina (down 61.5 per cent), China (down 49.8 per cent), Netherlands (down 31.8 per cent) and the U.S. (down 28 per cent).
Looking at changes in countries’ exports over the past five years and then considering the current trade disputes between the U.S. and China paints a scary picture. I’m concerned that we will see China make a permanent shift away from buying U.S. soya beans, and that South America and the Baltic Region will displace the U.S. as a supplier to China.
South America and the Baltic Region are still expanding production. They will be able to supply China’s needs. This will put pressure on U.S. soya bean values, as the U.S. will have to try to find new markets for its production. The only way to capture market share in countries other than China is to be the lowest-cost supplier. This will put pressure on U.S. farm profitability. If U.S. soya bean futures fall, you can expect corresponding price pressure on canola futures.
Canada is the world’s largest canola producer at 21 mmt annually. We export 90 per cent of the canola seed, oil and meal we produce into 50 different markets. Canada accounts for 50 per cent of world canola exports (40 to 42 mmt with an estimated value of $15 to $16 billion dollars).
The world trade of canola ($15 billion) is about one quarter the value of the world soya bean market ($59 billion). Annual world soybean export volumes are in the 130 mmt range and canola is in the 42 mmt range so canola exports are about one third the volume of soya beans.
Until now, China bought about 40 per cent of Canada’s canola seed exports (6.5 to 7 mmt in 2018) valued at $2.7 billion.
Oilseed crops have a lot of competition and can easily be replaced by a variety of crops, such as soya beans, canola, palm, sunflower and linseed. Oilseed buyers are very price sensitive, so during a trade dispute, China has many options to replace Canadian canola. The dispute will not hurt China, but it will certainly hurt Canada.
Now that China has stopped taking Canadian canola, where do we ship our excess production? We could crush more and ship oil and meal instead. Or could we?
The U.S. is the biggest buyer of canola oil and meal, accounting for about 52 per cent of oil exports and 69 per cent of meal exports in 2018. But with excess soya beans in the U.S. due to the Chinese trade dispute, the U.S. is likely to use more of its own home-grown soya beans, displacing imports of Canadian canola oil and meal.
Soya beans and canola are harvested somewhere in the world between March and December. There are only about two months where there is no new crop coming off somewhere — a very small window. This, combined with buyers’ ability to substitute other oilseed crops, gives buyers the advantage — they have many options.
Trade disputes with China will have long-term effects on world markets. Will oilseed exports from North America to China be restored to previous levels when these disputes are settled? I am afraid it may only be some of what it used to be.