Despite a collapse in world prices for oilseed, canola was virtually the only bright spot in Australian crop forecasts this week by the government commodities think tank, the Australian Bureau of Agricultural and Resource Economics (ABARE).

ABARE downgraded Australia's 1998/99 wheat and cotton crops and, despite a slight increase in forecast barley production, output of this grain will still be down heavily from last year. This left canola, virtually unknown in Australia at the beginning of the 1990s, the new star.

ABARE boosted its estimate of Australia's 1998/99 canola production to another record at 1.664 million tonnes, up from the agency's previous forecast for the year of 1.588 million tonnes.

This would be 93 per cent higher than the 8,60,000 tonnes produced in 1997/98, asAustralia's surge into the oilseed overcame disease, frosts, waterlogging and weather.

After producing only 1,70,000 tonnes of canola in 1991/92 and exporting only 20 tonnes in 1990/91, according to the official statistics, Australia is expected to export 1.247 million tonnes of canola in 1998/99.

This would make canola one of the country's bigger export crops and give Australia a slice of around 20 per cent of the total world trade, estimates ABARE.

In volume terms, canola is forecast to rate fourth among Australia's export crops in 1998/99, ranking only after wheat, barley and sugar and overtaking lupins.

All this has occurred as world canola prices collapse. On its home exchange of Winnipeg, canola recently plummeted to contract lows of less than C$320 a tonne.

Has Australia made a big mistake with its canola surge? Will Australia rush out of canola just as fast as it rushed in? Traders say no. Nobody is willing to predict Australian crop planting intentions for 1999 just yet, but canola is stillfetching prices about double those of wheat, barley and oats, which are lagging at less than A$150 a tonne.

Present Australian canola prices of A$305-$310 a tonne on a "trac" (transfer upcountry) basis, are well down from levels nudging A$390 a tonne in 1997/98. Low current prices could start to have an impact on plantings for the next crop, a trader said.

But canola was still producing relatively healthy returns for Australian growers, with those who sold at $370 a tonne counting their profits.

Most Australian canola growers would have averaged A$350-A$410 over the past year, the trader said. Australia still had a way to go to make it to the big time in the world canola trade, the trader said, declining to be named. "If Winnipeg and Europe go up we go up, otherwise we go down."

Still, Australian production is now in the world focus, especially with Australia harvesting in December/January at a different time from the rest of the world.

Australia's estimated canola crop of 1.66 million tonnes in1998/99 compares with Canada's forecast 7.6 million tonnes. The major Queensland grain handling and trading operation GrainCo commented in its latest weekly grains market report that good canola production prospects in Australia and Canada, in conjunction with favourable weather for oilseed crop production in South America, continued to build pressure. Both GrainCo and AWB Ltd, the re-named Australian heat Board, comment that markets and new crop opportunities for canola hinge on demand for new season canola by China, which imported more than one million tonnes in the past year.

Australian growers had made no mistake in switching heavily into canola, even though the market had collapsed, the trader said. "I'd consider it a very good move."