Grain Snippet: Canola Climbs with Crude
South Australian 26/27 season canola crops are shaping up for record yields in some regions and production is likely to exceed the record 684kMT set in the 22/23 season. Production is likely to be up due to the area planted of 238kha up 15kha y/y and near ideal growing conditions. Gross margins at the time of seeding were strong for canola relative to cereals and the early Autumn rains provided confidence to sow the crop despite the high prices for Nitrogen fertilizer.
The Australian Oilseed Federation has forecast Australia canola production for 26/27 at 7.93MMT up 0.42MMT y/y. This is in part to an increase in the area sown in WA with the Grains Industry Association estimating the planted area at 2.41Mha up 0.69Mha (37%) y/y, at the expense of wheat due to the higher relative value of canola at seeding time.
26/27 season canola prices have been in an uptrend through most of 2026, rallying from around $720/MT (Outer Harbor) in March, but have been meeting resistance around $835/MT (decile 8.8) since July. Prices have firmed on the lift in crude oil prices which have strengthened due to the conflict in the Middle East. Around 30% of global oilseed is used for biofuel production and a lift in crude oil has flowed through to canola prices.
Another element supporting canola prices are changes in the US to biofuel policies which sees a year-on-year lift of 60 percent in the requirement of plant-based feedstock for biofuel production. This has been bullish for US soybean (biodiesel) and corn (ethanol). The lift has also supported Canadian canola prices as The US is the major destination for canola oil, importing around 2.5 to 3MMT annually. Canada has increased crush capacity by 1.5MMT to be around 15MMT for 2026 and the increased demand is reducing exportable supply. This has been positive for Australian GM canola prices as China, historically a large importer of Canadian canola is pivoting to Australia to diversify canola origination. China imported 60kMT of Australia in July bringing year-to-date imports of around 250kMT. The increase demand for GM canola has seen the premium to non-GM canola close from around $100/MT earlier in the year to $30/MT.
Also adding to strength in canola prices has been the negative impact of El Nino on Southeast Asian palm oil production. Palm oil is harvested year-round and the evolving El Nino has led to lower rainfall in key palm plantations regions through Indonesia and Malaysia. Palm oil is the largest segment of the broader oilseed complex which includes soybeans and canola (rapeseed). With the oilseed complex being substitutable for some uses including biofuel, the lower production is lifting palm oil prices and oilseeds in general.
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