The Australian oilseed market is estimated to grow at a CAGR of 5.6%, during the forecast period (2020-2025).
Increased demand for canola oil, driven by a growing health consciousness amongst the consumers, has subsequently led to a surge in the demand for rapeseed for the oil processing sectors across countries. Favorable climatic conditions in the major rapeseed growing regions in western and southern Australia, following years of extreme drought, along with improved domestic and international prices of canola, are helping augment the production of rapeseed in the country, in order to cater to the expanding demand in the importing countries.
Furthermore, government initiatives in developing inter-trade relations with Asia have helped establish the significance of high-quality GM and non-GM oilseeds from Australia in the region. For instance, the Australian Export Grains Innovation Center (AEGIC), along with Grain Trade Australia, has been working towards the development of Australian canola exports for Chinese processing industries. Furthermore, the growth of the Philippine and Malaysian livestock and poultry industries pose a significant opportunity for Australian oilseeds for the feed industries in these countries.
Key Market Trends
Increasing Global Consumption of Canola Oil
Australia is well-positioned to meet the growing demand for canola oil through increased exports of canola or rapeseed. Growing health consciousness amongst the consumers in developing countries, aided by the claimed health benefits and improved functionality of canola oil, is further augmenting the production of rapeseed in the country. In 2018, Australia produced a total of 3,893.1 thousand metric tons of canola, when compared to 2,775.4 thousand metric tons in 2016. However, extreme drought conditions in the major canola producing regions have also hampered the growth in production in recent years. According to a report by the United States Department of Agriculture (USDA), at the beginning of the cropping season in 2020, adequate rainfall has helped reinvigorate production in drought-hit regions like New South Wales. Furthermore, favorable domestic and international prices, reaching almost USD 50.0 per ton during the first half of 2019-2020, are expected to stabilize and boost production in the country, thus, strengthening exports in the coming years. The area harvested has also risen significantly from 2,090.9 thousand hectares in 2016 to 3,171.1 thousand hectares in 2018. Therefore, an increase in the surplus production of canola in Australia is anticipated to cater to the ever-growing demand in the importing countries, during the forecast period.
Government Initiatives and Trade Developments Expected to Drive the Export Market
Australia is a leading producer of oilseeds and roughly accounts for 15% of the global trade in canola or rapeseed on average. Although climatic disruptions have hampered the growth of production and exports of oilseeds in recent years, Australian oilseeds are gaining prominence in Asian countries through the growing inter-trade development activities. For instance, under the Japan-Australia Economic Partnership Agreement, Australia is increasingly raising the significance of its high-quality GM and non-GM grains and oilseeds for the Japanese processing sector, as part of Japan's restructuring the overall agricultural sector. This also led to an enhanced demand for Australian cottonseed, with Japan constituting 76.3% of the import value in 2018. Moreover, the Chinese government's decision to impose restrictions on imports of Canadian canola in March 2019, is expected to lead Australia to leverage the opportunity of exporting rapeseed to China. However, the rampant outbreak of the African Swine Fever in China has thwarted potential soybean exports from Australia to the country. However, the Australian Bureau of Agricultural and Resource Economics (ABARES) projects canola production to rise to 3.9 million metric tons during 2022-2023, under favorable climatic conditions, thus, aiding the market for non-GM canola in the European food manufacturing industry. These factors are further expected to drive the oilseed market in Austraoia, during the forecast period.
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