How good is a cockatiel's sense of smell, compared to humans, dogs and cats?
Can they smell their food?
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It was long thought that most birds had no sense of smell at all. A few groups (the Cathartid vultures [turkey vulture & greater and lesser yellow-headed vultures], Procellariformes [storm-petrels, etc.], kiwis, and a few others) do have an excellent sense of smell. We also know that some have little or no sense of smell (e.g., black vultures follow turkey vultures to use the turkey vultures' sense of smell to guide them to carrion).
This makes functional sense, when you think about the problem of using a sense of smell when in flight. The air rushing through the nares (approximately, 'nostrils') would seem to be moving too rapidly to be able to be sampled for odors, without some specialized equipment (which costs energy to build and is only worthwhile if, like Cathartid vultures cruising over treetops in search of food, there is a significant return on that investment).
It has become increasingly clear, though, that most birds possess at least some sense of smell. See Lightfoot's section on olfaction in her article on avian geriatrics. Also, if you can tolerate some highly technical literature, "The underestimated role of olfaction in avian reproduction?" and "Avian olfactory receptor gene repertoires: evidence for a well-developed sense of smell in birds?".
It seems that the olfactory structure is this: air enter the nares, and then passes through three chambers on the way to the respiratory system. In the second of these chambers, there are olfactory sensors that are connected by nerves to the brain and which, structurally, seem very similar to mammal olfactory sensors.
Most of the research so far has been done on chickens (which seem to have a decent sense of smell, but probably not as good as ours) and pigeons (which seem to have a pretty good sense of smell. Gang-gang cockatoos, too, seem to have a decent sense of smell (perhaps in the same general range of ability as us). I don't know of any behavioral research on other Psittacines (parrots, cockatiels, etc.), but the anatomy of the olfactory organs seems similar.
So, the answer to your question probably should be: stay tuned--research is turning up new abilities right now. The best we can say for now is that it is likely that cockatiels have a sense of smell, but that it is less developed than the human sense of smell. That's just what is likely, though, pending further research. I've tried to develop some experiments that would work with my cockatiels, but every attempt has been undone by their general inquisitiveness and desire to play with everything.
This is one of those fun areas in which knowledge is just developing, and careful observations by non-scientists can make contributions to the field. It gives us one more way to enjoy interacting with our cockatiels, too.
A timely question ...Tom G.