Grain Snippet: Global Tensions and US Policy Cause Surge in Oilseeds
Canola prices received a boost through mid-June as bids rose from circa $820/MT to $852/MT in Adelaide’s Outer Harbour zone; the discount to GM-canola has slightly declined from $100/MT to $80/MT. Local prices have remained firm through May/June driven by dryness through the start of 2025 in Australia, coupled with firming global rapeseed and canola futures prices. Each rapeseed futures in the EU and canola futures in Canada have been supported by declining old crop supplies with a very tight carry-out ahead of the new season harvest. End users have sought to cover forward demand amid the uncertain and volatile oilseed complex.
Most recently, there has been a strong rally in crude oil prices with concerns over supply and availability due to heightened tensions in the Middle East, following attacks and retaliation between Israel and Iran. Nearly 30% of global oilseed production is used for biofuel production and therefore changes in crude oil prices are mirrored in oilseed prices which include rapeseed/canola, soybean and palm oil.
European rapeseed stocks have been depleted due to the poor season in 24/25 where production was down 3.5MMT (17%) y/y at 16.9MMT caused by excessive soil moisture through the growing season limiting yield. Compounding the stocks position in Europe was lower production in Ukraine which is a major exporter of rapeseed to Europe. 24/25 Ukraine rapeseed production was 3.8MMT down 1MMT y/y, and the combined decrease in supply dropped stocks-to-use from 7.6% to 5.6%. The 25/26 European rapeseed harvest is due to commence in late June, and the rapeseed crop is forecast 19.35MMT, which will help to cover end-user demand.
Canadian canola stocks have been tight due to strong crush and oil exports to the US through 2024 due to the lucrative US blender’s tax credit (BTC), expiring 31st December 2024. This program was replaced with the new 45Z Clean Fuel Production Credit from the 1 January 2025. US biofuel producers were keen importers of Canadian canola oil as the old BTC provided a US$1/gallon credit for biofuel production whereas the new 45Z did not provide a credit for canola oil. Recent proposed changes by the EPA are before the US congress and are expected to increase the credits for canola and particularly soybean oil, which is expected to draw down US oil stocks next year. US soybean oil prices have surged US$8/lb (17%) to US$56/lb early this week, bolstering canola futures.
The outlook for the 25/26 Canadian canola crop has been somewhat concerning as some regions of the Canadian Prairies have received below average rainfall through planting and germination. Also, Canadian growers have been rumoured to have reduced the planted area to canola, as the threat of reciprocal Chinese tariffs on Canadian canola seed imports still loom over the industry. China introduced 100% tariffs on Canadian canola oil and meal in March 2025 and have been conducting an anti-dumping inquiry, with findings due to be released in September 2025.
The Canadian production concerns, coupled with the positive 45Z policy development in the US, and the heightened Middle East tensions have each been highly supportive for Canadian canola and US soybean oil, each very strong proponents of the global oilseed complex.
This is a sample only, if you would like to view the entire document and our recommendations, please contact CloudBreak to discuss becoming a member on (08) 8388 8084.