Canada’s canola crop rebounded to a more normal level of production in 2022 after the drought-reduced 2021 output. Statistics Canada, in its September report, estimated 2022 canola production at 19.1 million tonnes, up from 13.8 million in 2021 but below output from the previous four years. The biggest Canadian crop on record was 21.5 million tonnes in 2017. (See Table 1.)
Hot, dry conditions, especially in the last half of the season, reduced yields in Alberta, and southern and western Saskatchewan. The Peace region had a wet spring that delayed and reduced seeded acres, then experienced a drier-than-normal summer. Late seeding due to excess rainfall through Manitoba and eastern Saskatchewan meant many canola crops missed the prime growing month of May. This reduced yield potential, even though a longer frost-free period allowed late crops to reach maturity.
Statistics Canada, in September, forecast production and yield for Saskatchewan at 9.7 million tonnes and 37.8 bu./ac., for Alberta at 6.1 million tonnes and 41.7 bu./ac., and for Manitoba at 3.1 million tonnes and 42.5 bu./ac.
While the CCC goal of 52 bu./ac. average yield by 2025 is possible based on genetic potential of the crop, it will require better than average growing conditions from seeding to harvest – something farmers haven’t experienced in recent years.
Rise of the “other” countries
Canada, the European Union and China continue to lead the world in canola and rapeseed production, but production from those three sources has been basically flat over the past five years. Global supply, estimated at 83.1 million tonnes in Oilseeds: World Markets and Trade for September 2022, a report from the United States Department of Agriculture’s Foreign Agricultural Service (FAS), has risen of late on the back of strong and steady growth in “other” markets – specifically India, Australia, Russia and Ukraine. Those four countries increased production by 10 million tonnes over the past five years, with an FAS forecast of 24.8 million tonnes for 2022. (See Table 2.)
Big rebound in global oilseed supply
Ukraine, normally the world’s largest sunflower producer, will have a much smaller crop this year. The country produced 17.5 million tonnes of oilseed sunflowers in 2021, two million tonnes ahead of Russia, according to the FAS Oilseeds: World Markets and Trade report for September 2022. However, FAS puts Ukraine’s production at 10.5 million tonnes for 2022 – a huge drop for obvious reasons. Ukrainian farmers are working in a war zone.
While this drop is significant for Ukraine, it has little bearing on world oilseed production. FAS, as of September, put oilseed output at 644.8 million tonnes for 2022, up from 602.2 million in 2021. Soybean accounts for most of the gain, up 36 million tonnes year over year.
World vegetable oil production, which includes palm oil, is at 219.1 million tonnes, up from 211.3 million last year, according to FAS.
Canola Digest, wondering how production can increase despite global reports of drought and heat, posed three questions to USDA market analysts.
- We heard a lot about sweltering summer heat in Europe. Yet FAS forecasts EU rapeseed production at 18.2 million tonnes, up from 17.2 million in 2021. Why did summer heat not affect rapeseed production?
Bob Tetrault, FAS analyst: “Europe’s rapeseed crop was mostly harvested before the onset of the excessive heat and drought. Prior to the heat wave, the yield looked very good. But heat diminished yield to close to the five-year average.”
- Chinese rapeseed production forecasts are flat year over year, based on your September estimate. Soybean production is up. Why did drought along the Yangtze region in China not affect rapeseed or soybean production forecasts?
Tetrault: “Drought in southern China along the Yangtze was very severe, however, the majority of soybean production is in northern China. For rapeseed, southern China along the Yangtze is an important growing region, but most of the crop had been harvested.”
- Why did drought in the U.S. not affect soybean production? (The question was asked based on August estimates, which had U.S. soybean production at 123.3 million for 2022, up from 120.7 million in 2021. The September estimate was revised lower, to 119.2 million.)
Keith Menzie, senior oilseeds economist with the World Agricultural Outlook Board of the USDA: “Although the drought is mostly west of the main soybean producing region, the impact can be seen in the September Crop Production report. Kansas, Nebraska and Iowa yields are currently forecast at 8, 11, and 3 bu./ac., respectively, below 2021 yields. Furthermore, Kansas, Nebraska and Illinois yields in September are below the August forecast, reflecting the impact of drought. At the national level, yields are not too far below trend levels as many areas of the country are doing well.”
Another way to look at canola prices
Farmers know the prices they receive for grain delivered. Farmers can track their marketing performance with a comparison to futures prices, a transparent system of price discovery. But how do changing farm-gate prices trickle down to end users? Statistics Canada’s Consumer Price Index tracks about 60 foods and food categories, and from August 2021 to August 2022, the price of edible fats and oils rose higher than any other food product. It was up 27.7 per cent year over year, compared to 23.5 per cent for flour, 13.2 per cent for fresh fruit, 7.1 per cent for beef and and 9.8 per cent for food in general.
Edible fats and oils includes margarine, extra virgin olive oil, and cooking and salad oils (including canola oil), but it does not track these products individually. When asked about canola price tracking, a StatCan spokesperson identified two other programs with price movements pertaining to canola and canola oil. The Raw Materials Price Index measures prices Canadian manufacturers pay for raw material inputs. Using the index reference point of January 2020, which is “100”, canola prices were 109.0 per cent of the reference point in September 2020, 192.5 in September 2021 and peaked at 249.5 in April 2022 before sliding back down to 180.0 in August. At 249.5, prices were 2.5 times higher than in January 2020. The Industrial Product Price Index, which measures prices manufacturers receive for goods produced in Canada, shows a similar trend line. To find these tables, go to www150.statcan.gc.ca and enter the index names in the search.
“Drought in southern China along the Yangtze was very severe, however, the majority of soybean production is in northern China. For rapeseed, southern China along the Yangtze is an important growing region, but most of the crop had been harvested.”
Notable demand drivers for Canadian canola
The Canola Council of Canada announced three major demand drivers through the first half of 2022.
In April, the U.S. Environmental Protection Agency (EPA) declared that canola oil-derived renewable diesel, jet fuel and other biofuels qualify as “advanced biofuels” under the Renewable Fuel Standard (RFS) program. This put canola on a level playing field with other oilseed crops for access to the U.S. renewable diesel and sustainable aviation fuel markets.
In May, China reinstated access for canola exporters Richardson and Viterra. China first implemented market access restrictions for canola seed from these two companies in March 2019. Canadian seed exports to China were worth $2.8 billion in 2018, the year before the restrictions. That fell to $800 million in 2019, then increased to $1.4 billion in 2020 and $1.8 billion in 2021.
In June, Canada’s Clean Fuel Regulations (CFR) recognized canola’s potential as a low-carbon feedstock for biofuels. The CFR mandates that fuel suppliers in Canada lower the carbon intensity of fossil fuels by 15 per cent by 2030. Using biofuels is one way to achieve compliance. CFR is scheduled for implementation on July 1, 2023. Find more information on all three announcements at canolacouncil.org.