Market Morsel: GM Canola at no discount.
Market Morsel
I was asked to come on the ABC country hour last week to discuss the lack of premium for non-GM canola in western Australia. Unfortunately, I was unavailable, but I thought putting together a short piece on this was worthwhile.
GM canola has generally been at a discount to non-GM canola since its introduction more than a decade ago. On average, the discount has been 8%, but has been as high as 18%.
WA is a huge producer of canola and the largest producer of GM. There is little domestic crush in Western Australia, so most of this is exported.
At the moment, the discount has closed to parity. Why is this?
There are a few reasons.
- Canada is experiencing reduced canola production, of which the majority of their canola is GM.
- As the availability of Canadian supplies declines, we tend to see the spread narrow as canola becomes more of a homogenous product.
- A high volume of canola is turned into biofuels; in many nations, it is not vital that it is non-GM.
- In Europe, whilst the majority of demand for Australian canola tends to be for biofuels, they want non-GM. This is due to the increased value of the non-GM canola meal for the feed sector.
Non-GM commands a premium, but the differentiation becomes lower when there is a shortage of overall canola.
Farmers growing GM in WA will have the agronomic benefits of cleaning up paddocks without the discount. On the East Coast, with higher domestic demand, the premium will slip, but possibly not to the extent of the West.
