How Brexit affects Australian Grain
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How Brexit affects Australian Grain

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How Brexit affects Australian Grain


Australian canola has typically entered the EU market via ports in Germany, France and Belgium. On the face of it then, Brexit should have no bearing on Australia’s exports of canola to Europe. However, a recent shipment of canola from Newcastle to the United Kingdom suggests that Brexit could affect Australian grain.

For canola, current access to the EU is not encumbered by tariffs and quota, but by technical requirements. In particular, the Renewable Energy Directive of the EU requires certification that canola used in biodiesel production delivers 50 per cent emission savings compared to conventional diesel production. That savings requirement increases to 60 per cent in 2018. For canola to be eligible for import to the EU, growers must participate in one of two certification schemes, but must participate separately for each exporter they work with. EU non-GM premiums of $20 - $50/tonne has so far made this additional administration worthwhile.

Brexit has the potential to increase the burden of the Renewable Energy Directive. Following Brexit, the UK may establish its own scheme, it may abandon it altogether or it may set different savings targets. While manageable in their own right these complications would likely increase the required premiums to encourage canola exports to the EU and UK, and would certainly alter the potential to capitalise on short-term opportunistic sales. Opportunities like the most recent shipment to the United Kingdom would be a possible casualty.

Like all commodity exports post Brexit, currency strengths will be the most significant driver of Brexit’s impact on changed Australian grain export prospects in that part of the world. Resultant differences in technical access requirements whether related to the RED, genetic modification or traditional sanitary and phytosanitary specifications, will all contribute to reduced flexibility in sales destination. Should Brexit be just the first departure from the EU, complications into the future will grow and the cost of selling canola to the European nations escalate.

European Union imports of Australian canola
Source: UN Comtrade, Rabobank