AUSTRALIA will have the perfect opportunity to market what is anticipated to be a larger than average winter crop with Rabobank forecasting a marked drop in European grain production this year due to drought.
Rabobank's London-based global grains and oilseeds strategist Stefan Vogel said all eyes within the world grain trade were now on Australia to see how much Australia's crop would offset the subpar result in Europe, which is likely to see its lowest canola production in nearly 15 years and well below average cereal tonnes.
Mr Vogel forecast a particularly bright outlook for Aussie canola exporters.
However, on the cereal front, other analysts say there may be more competition than expected from the Black Sea, with Commonwealth Bank analyst Tobin Gorey reporting a spate of selling activity from both Russia and Ukraine, which may mean crops are better than expected, with anticipated yield losses due to drought not as bad as anticipated for some growers.
Mr Vogel pinpointed wheat and canola as the two crops in particular where there would be opportunities.
After an excellent 19-20 harvest where the EU exported 38 million tonnes of wheat, this year Mr Vogel is anticipating a drop of at least 10m tonnes, with major wheat growing nations such as France, Germany and Romania suffering from dry and hot conditions.
Mr Vogel is confident that even with a bigger Russian crop there would still be a regional shortfall, saying he expected Ukraine to be 10pc down year on year.
"So who can offset that shortfall in European production that would be going into export markets?" Mr Vogel questioned.
"Everyone is banking on Australia to make that happen on the world market because no one else has a whole lot of buffer to make that up," he said.
World wheat markets have seen volatility over the past week, with US futures remaining steady but Mr Gorey reported a big spike in Paris futures.
Harvest pressure saw a drop in the cash price in the Black Sea region.
On the canola front, the EU is tipped to record its smallest crop since 2006.
The EU, already Australia's biggest customer for canola, could potentially look to double its imports this year.
"Once again in Europe, we have an extremely poor rapeseed/canola crop this year.
"Last year, the European rapeseed crop was bad, but this year the already-harvested crop is even worse," Mr Vogel said.
He said Ukraine also a key suppliers of canola to Europe was looking at a smaller crop while the EU does not like to use Canadian canola as much due to the fact it is generally genetically modified.
"Europe is actually going to need a lot of Australian canola, maybe close to doubling the amount we took last year and getting back to volumes seen in 2017 and 2015 of around 1.9 million tonnes," he said.
Interestingly, the EU demand comes even though there is markedly less call for biodiesel, one of the major uses for canola in the EU, due to less travel during the COVID-19 pandemic.