Australia may soon start importing canola for the first time in nearly two years to east coast markets after dry weather destroyed crops in the south-eastern part of the country, traders said on Wednesday. Quantities though would be relatively small, they said, and would have little impact on world prices, which are under pressure as fears of a slowing global economy squeezing demand continue to percolate through commodities markets.
"Imports may be needed again this year if the current production forecasts are correct," grain and oilseeds handler and marketer GrainCorp Ltd said in a market report. GrainCorp said domestic crushers are snapping up available stocks midway through the 2008/09 harvest. US commodities giant Cargill Inc, which operates oilseed crushing plants in Melbourne and Newcastle on the east coast, might import canola from Canada, the world's third largest producer after the European Union and China, traders said.
Cargill and local private group Riverland Oilseeds are the major operators of oilseed crushing plants in Australia. "It is something that will be kept very in-house until people see the nominations for vessels but the quantities involved won't be that large," said a Sydney-based grains traders who did not wish to be named.
He said the crushers might turn to imports in attempt to drive down domestic prices on Australia's east coast. A GrainCorp spokesman said domestic trade quotes this week were in the A$640-$650 ($422-$429) range compared with A$620 a tonne landed at Australian east coast ports for canola imported from Canada.
"It is cheaper bringing in Canadian canola," said another canola trader in Sydney. Australia last imported canola in December 2006, when Cargill imported about 50,000 tonnes of genetically modified Canadian canola after the east coast Australian crop was decimated by the worst drought in more than 100 years. Cargill was offering A$645 a tonne for canola on Wednesday delivered to its crushing plant at Newcastle, about 160 km north of Sydney on Australia's east coast.
The Australian Securities Exchange canola for January futures contract was at A$607 a tonne, about A$50 above the front month contract's level two months ago. The trader said east coast Australian buyers might also source canola from Western Australia, the country's top exporting state of the oilseed, which largely services European markets.
Tim Glass, head of commodities at National Australia Bank Ltd, said low oil content in the crop harvested to date in south-eastern Australia was the main reason imports were being talked about.
"The very dry September and October that Victoria and southern New South Wales had means crushing plants in those places are going to struggle because a lot of canola got cut for hay fairly early," said Glass. "The oil should pick up as the harvest moves on but the crop is not going to be great." Glass said plunging shipping freights and weaker prices on international markets would also make imports more competitive. "Twelve months ago ocean freights would have been completely restrictive to something like that happening," he said.
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