Biofuels Boost Canola Demand In EU

Despite lower yields, canola production reached record levels in the EU in 2005 due to increases in dedicated area inspired by demand from biofuel producers, a trend that will continue Despite lower yields, canola production reached record levels in the EU in 2005 due to increases in dedicated area inspired by demand from biofuel producers, a trend that will continue in 2006. Oil from the crop, which is needed for the production of biodiesel at many European plants, is in high demand, keeping EU prices above international prices. Even crushers have taken notice, with many switching from soybeans to canola.

According to Eurostat, the canola harvest in the EU-25 for 2005 reached 15.5 million tons, a 25% increase on the five-year average for the region.

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While the production increase was partly attributable to higher yielding canola hybrid varieties and the recent EU sugar reform (which called for 900,000 fewer hectares of sugar beets in the EU, thus creating more room for canola), the biggest force of change was demand for canola oil keying a growth in planted area — in 2005, there were 4.8 million hectares (Ha) planted with canola across the EU-25, which was 6% more than in 2004, and a 14% more than the average over the last five years. The rising demand for biodiesel is forecast to keep the price for canola oil constant — or even give it another boost. Oddly, forecasts see EU demand for canola oil in 2006 between 6 and 7 million tons. At the same time, prices for canola are weaker. The growing price differential is the result of a bottleneck: the production capacity of the oil mills is limited, so canola oil demand exceeds supply, despite an excess of canola.

Local Changes

The two biggest canola producers in the EU are Germany and France, which increased their area planted to canola by 11% and 9.9%, respectively. There are also reports that the trend of increased planted canola area continues in Germany, according to USDA-FAS. The area planted with winter canola, the most important type in Germany, has increased by 5.8% this season compared to last season. FAS Stockholm reports that the area under winter canola in Sweden in 2005-06 has increased by 40% to 50,000 hectares, while FAS Paris reports a winter canola increase of 8% to 1.3 million Ha to be harvested in 2006. FAS Warsaw reports that the winter canola planting in Poland is about the same as last year (around 500,000 Ha).

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The largest increase in area was seen in Latvia and the Netherlands, both of which had substantial year-on-year increases. In Latvia, canola growth more than doubled, increasing 228% percent, and in the Netherlands, the increase was pegged at 138%. The largest yield was reported from Belgium, reaching 4.1 tons/Ha. Spain came in with the lowest average yield, at 1.1 tons/Ha, caused by the severe summer drought in the area.

Overall, average EU canola yields in 2005 reached 2.7 tons/Ha. This is down nearly 20% from the record harvests of 2004, but up 4.2% percent on the five-year average.

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