Crushing economics: scaling up canola processing in Australia

Australia could potentially double the amount of canola it processes domestically, but the success of any major expansion in crushing capacity will depend on finding profitable markets for canola meal — a protein source and key ingredient in livestock feed — according to a new Rabobank report.

The report, ‘Feeding the future: The coproduct that determines how far Australia can scale crushing’, says canola crushing is often viewed through the lens of growing demand for vegetable oils and biofuels. However, the specialist agribusiness bank’s RaboResearch division says the economics of crushing depend equally on the industry’s ability to ‘commercialise’ canola meal, the higher-volume co-product generated during processing.

The report’s author, Rabobank senior grains and oilseeds analyst Vitor Pistoia (pictured here), says Australia imports large volumes of protein feed ingredients that could be partially replaced by domestically produced canola meal, creating a significant opportunity for the Australian crushing sector.

“Australia currently imports around 1.02 million tonnes of canola meal equivalent annually — primarily in the form of soybean meal and PKE (palm kernel expeller),” he said.

Import replacement

Pistoia said the existing imports highlight the scale of the opportunity for Australia’s canola-processing industry.

“Australia already imports a sizeable pool of feed protein. That existing market provides a practical benchmark for how much additional canola meal could potentially be absorbed if domestic crushing expands,” he said.

The RaboResearch report estimates that import replacement alone could add up to two million tonnes of additional Australian canola crushing capacity. This is more than double Australia’s current installed crushing capacity of around 1.6 million tonnes.

If realised, Pistoia said, this would lift domestic processing from around 25% of Australia’s canola production today to approximately 50%, moving the country closer to major international processors such as Canada, where crush is projected to reach around 64% of national canola production in 2026/27.

Pistoia said replacing imported livestock (and some pet food) feed ingredients represented the most immediate and scalable opportunity for canola meal demand growth.

“Import substitution is the first logical market because the logistics systems, customers and commercial channels already exist,” he said.

“The key challenge is ensuring canola meal remains competitive against soybean meal, PKE and other feed ingredients on a delivered nutrient-value basis. The commercial question is not whether meal can move, but whether it can move profitably.”

Dairy and beef sectors strongest potential

The report identifies Australia’s dairy and beef sectors as markets with the strongest long-term potential demand for canola meal.

RaboResearch says canola meal is particularly well suited to ruminant feed systems, due to its protein profile and nutritional characteristics, positioning it competitively against alternative feed products in dairy and beef rations.

“Australia’s dairy and beef industries represent the most attractive demand pools for additional canola meal,” Pistoia said.

Western Australia strong supply-side

The research also looks at the ongoing debate around where future Australian crushing capacity should be built. While eastern Australia is closer to livestock demand centres, Western Australia retains a strong strategic position because it produces the country’s largest canola surplus and has relatively limited existing crush capacity, the report says.

Pistoia said transport logistics to markets in the eastern states and New Zealand “should not be seen as a structural barrier” to expanding crushing in Western Australia because well-established feed-import supply chains already move thousands of tonnes of feed ingredients across Australia each year.

Long-term value-chain gains

Pistoia said one of the report’s key findings is that canola meal should be viewed not as a constraint on crushing expansion, but as an opportunity.

“Strong oil demand may be what initially attracts investment into crushing, particularly with growing interest in renewable fuels,” he said.

“But long-term success depends on developing profitable and scalable markets for meal. Once that happens, additional crushing can create a powerful feedback loop across the entire canola value chain.

“More crushing supports more stable demand for canola seed. More stable demand can help underpin grower returns and encourage production. Larger and more reliable canola supply then improves crushing economics, while locally produced canola meal can increase feed availability and reduce exposure to imported protein-meal markets.”

Image: Supplied