WESTERN PRODUCER — , which would be a blow to the Canadian canola sector, says an analyst.
“It’s not good news,” said John Duvenaud, publisher of the Wild Oats Grain Market Advisory.
The European Union is a top customer for Canadian canola. It crushes the crop and uses the oil to make biodiesel.
The EU imported 2.52 million tonnes of Canadian canola in 2020, ranking as Canada’s second biggest market that year, only slightly behind China’s 2.58 million tonnes.
Imports tailed off considerably to 954,329 tonnes in 2021 and 90,406 tonnes through the first 10 months of 2022 due in a large part to Canada’s drought-reduced 2021 harvest.
Germany is the EU’s leading biodiesel producer, with an estimated 3.67 billion litres of production in 2022 or one-third of the EU’s total output, according to the U.S. Department of Agriculture’s Foreign Agricultural Service.
Reuters reports that German environment minister Steffi Lemke will soon send proposals to the cabinet to ban crop-based biofuels by 2030 to reduce greenhouse gas emissions.
Germany has a coalition government comprised of the Social Democrats, the Green Party and the Free Democrats.
Lemke is with the Green Party. She is supported by German agriculture minister Cem Oezdemir, who is also in the Green Party and believes food should not be used for fuel.
The Canola Council of Canada and the Canadian Canola Growers Association were contacted for this story but could not make somebody available for comment.
Duvenaud has heard from sources that the German ban is likely to happen.
It is not without precedent. There is already a move afoot in the EU to phase out palm oil and soy oil-based biofuels due to concerns surrounding deforestation.
While Germany’s proposed ban on all crop-based biofuel would be a blow to Canada’s canola sector, it would not be devastating, said Duvenaud.
That is due to the plethora of new canola crush plants being built in Canada. Those plants are expected to add 5.7 million tonnes of crush capacity over the next few years, reducing the industry’s reliance on export markets.
Canada could afford to eliminate one market the size of Germany, said Duvenaud.
“The danger is that if Germany is going to do it, what’s stopping the rest of Europe from doing it?” he said.
The other factor to consider is that Germany would suddenly have more rapeseed oil without a home. About half of the country’s 3.7 million tonnes of rapeseed production is used to make biodiesel, according to Reuters.
“This proposal could generate changes in trade flows with more German rapeseed oil going for export,” Oil World analyst Thomas Mielke told Reuters.
“Such a drastic policy change would of course also reduce import demand, intensify the competition with producers in exporting countries and reduce prices.”
Canadian canola exporters have an ally in Germany’s biofuels industry association. It told Reuters that Lemke’s draft proposal would increase the country’s carbon dioxide emissions by 32 million tonnes.
Germany’s transport sector emitted 148 million tonnes of CO2 in 2021. The country is obligated under its climate protection laws to get emissions down to 85 million tonnes by 2030, according to Reuters.
