Australia's canola trade is 'dangerously exposed' to global disruptions and must diversify, experts warn
The canola trade is being warned it is dangerously exposed to changes to renewable energy policy in the EU. (ABC Rural: Jessica Hayes)
A grains industry expert says Australia's canola industry will be "dangerously exposed" if it does not urgently diversify export markets and embrace value adding.
Key points:
- The Australian Export Grains Innovation Centre's chief economist says the canola trade is dangerously exposed to global disruptions
- Exports to the European Union accounted for 76 per cent of Australian canola exports from 2014/15 to 2019/20
The Australian canola industry is being urged to find alternate markets and embrace value adding to limit risk
The warning comes after the grains industry was blindsided in May when China suddenly imposed an 80.5 per cent tariff on Australian barley amid ongoing political tensions between Beijing and Canberra.
Australian Export Grains Innovation Centre chief economist Professor Ross Kingwell said the canola sector is at the mercy of European Union trade policy.
"We are very exposed to whatever happens in the European Union and the demand for canola that is used for bio-diesel is predicated on the Renewable Energy Directive policy," he said.
"Fortunately in Australia, we've been able to prove and verify that the way in which we produce canola and the way it's delivered into the EU has a small emissions footprint and that gives us lucrative access to that market.
"But if there is ever a change in that policy, if they tighten regulations or raise the environmental bar and we can no longer satisfy that, then immediately we lose access to that market."
Australia 'wise' to examine new markets
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) predicts Australian canola exports will rise by 42 per cent to 2.4 million tonnes next financial year.
ABARES' latest data also predicts the Australian canola industry will face increased competition, because price premiums will be an incentive for producers of other feedstocks, such as sunflower, to achieve necessary greenhouse gas emission thresholds.
AEGIC chief economist Professor Ross Kingwell says the Australian canola industry is at the mercy of European Union trade policy. (Supplied: Ross Kingwell )
Professor Kingwell said a trend towards electric vehicles and away from liquid fuels such as bio-diesel could also devastate the trade.
"We need to find alternate uses for the canola that we produce, be that in the feed industry or differentiated markets, so I think it's wise to try to examine alternative markets early on," he said.
Industry is 'well positioned'
Alba Edible Oils produces value-added canola oil products in Western Australia and Victoria for use in the food service industry.
Managing director, John Slee, said despite the challenges, the threat of market access disruptions could also be seen as an opportunity for Australian canola growers.
The EU accounted for more than 75 per cent of Australian canola exports between the 2014/15 and 2019/20 financial years. (ABC Rural: Jo Prendergast)
"Because the industry has been very focused on supplying that European market, we have been ensuring our production systems are sustainable," he said.
"We've had fantastic segregation of GM and non-GM product, so the bar has been set pretty high, and Australian and WA farmers have stepped up and put systems in place to be able to meet those requirements.
"I think we're really well positioned to get our product into other markets, and it's probably those markets that are looking for sustainable production of the food supply chain, and is prepared to pay a few extra dollars for that.
"We've already got our systems in place so I believe we're going to be at the top of the list when it comes to switching and going to other markets."